Www.puc.pa.gov
BEFORE THE
PENNSYLVANIA PUBLIC UTILITY COMMISSION
Pennsylvania Public Utility Commission : R-2017-2595853
The Pennsylvania Office of Consumer Advocate : C-2017-2603058
The Pennsylvania Office of Small Business Advocate : C-2017-2603512
Barbara McDade : C-2017-2603050
Noel Netel : C-2017-2601550
Theresa Sylvester : C-2017-2603078
Dolores Landis : C-2017-2603587
John Hooks : C-2017-2603669
Casey Hogan : C-2017-2604355
Stockton Alloway : C-2017-2604423
Fred Wesner : C-2017-2604854
Michael Saville : C-2017-2604937
Paul Walaski : C-2017-2607003
Gail Purdy : C-2017-2607376
Ronald Russo : C-2017-2607392
Stephen Schwarz : C-2017-2607408
Barry Fenicle : C-2017-2607439
Margaret O’Leary : C-2017-2607455
Dolores Ferraro : C-2017-2608009
Hofmann Industries Inc. : C-2017-2608461
Nancy Bruce Harris : C-2017-2608964
Raymond Saunders : C-2017-2609614
Remedios Leynes : C-2017-2609712
Alice Piper : C-2017-2609820
Alfred Kump : C-2017-2609834
Angel Pardellas : C-2017-2610358
Philip Codelka : C-2017-2610380
Ronald Serafin : C-2017-2611289
Linda Waddington-Tully : C-2017-2611329
David Dulebohn : C-2017-2611485
Shannon Brown : C-2017-2611572
Maria Salve : C-2017-2611604
Michael Pope : C-2017-2611968
James McLaughlin : C-2017-2612710
Christopher Visco : C-2017-2612728
Gerald and Susan Roe : C-2017-2615016
Devin Olsen : C-2017-2617879
Homer Cote : C-2017-2615256
Scott Whitcomb : C-2017-2626474
v.
Pennsylvania-American Water Company
RECOMMENDED DECISION
Before
Dennis J. Buckley
and
Benjamin J. Myers
Administrative Law Judges
TABLE OF CONTENTS
I. HISTORY OF THE PROCEEDING 2
II. DESCRIPTION OF THE COMPANY 10
III. PUBLIC INPUT HEARINGS 10
A. Public Input Hearing Washington, PA 11
B. Public Input Hearing Pittsburgh, PA 11
C. Public Input Hearing Uniontown, PA 11
D. Public Input Hearing Harrisburg, PA 12
E. Public Input Hearing New Cumberland, PA 14
F. Public Input Hearing Wilkes-Barre, PA 15
G. Public Input Hearing East Stroudsburg, PA 16
H. Public Input Hearing East Fallowfield, PA 17
I. Public Input Hearing Wyomissing, PA 19
IV. TERMS AND CONDITIONS OF THE JOINT SETTLEMENT 19
A. Revenue Requirement 19
B. Base Rate Stay-Out 23
C. Act 40 of 2016 23
D. Low-Income Issues 24
E. Service-Related Issues 25
F. Unaccounted-for Water 25
G. Street Sweeping Within the City of Scranton and the Borough of Dunmore 25
H. Formal Complaint of Stockton Alloway 26
I. Main Extensions 27
J. Cost Allocation and Rate Design 28
K. Effective Date 31
V. DISCUSSION 31
A. Applicable Law 31
B. Analysis 33
a. Opposition to the Joint Settlement 35
b. Statements in Support 40
c. Disposition 51
VI. CONCLUSIONS OF LAW 57
VII. ORDER 58
On April 28, 2017, Pennsylvania-American Water Company (PAWC or the Company) filed Original Tariff Water-Pa. P.U.C. No. 5 and Original Tariff Wastewater Pa. P.U.C. No. 16 requesting an increase in its total annual operating revenues. On October 16, 2017, after a comprehensive investigation of PAWC’s operations and finances, which included: extensive discovery, the submission of direct, rebuttal and surrebuttal testimony covering a wide range of issues, nine public input hearings (including a state-wide “smart hearing”), and extensive negotiations among the active parties, a unanimous Joint Petition for Settlement (Joint Settlement or Settlement) was filed with the assigned Administrative Law Judges (ALJs). For the reasons stated herein, this Recommended Decision recommends that the Commission approve the proposed Joint Settlement submitted by the active parties in this case without modification. The proposed Settlement provides for an increase in annual operating revenues of $61.85 million, or approximately 9.41% increase, in lieu of the $107.9 million, or approximately 16.4%, increase originally requested. The Commission must act with respect to the proposed Joint Settlement by no later than its public meeting on January 18, 2018.
I. HISTORY OF THE PROCEEDING
On April 28, 2017, Pennsylvania-American Water Company filed Original Tariff Water-Pa. P.U.C. No. 5 and Original Tariff Wastewater Pa. P.U.C. No. 16 requesting an increase in its total annual operating revenues to become effective June 27, 2017. The amount of the requested increase equaled $107.9 million, or approximately 16.4%.
The Office of Consumer Advocate (OCA) filed a complaint on May 8, 2017. The Office of Small Business Advocate (OSBA) filed a complaint on May 10, 2017. The Commission’s Bureau of Investigation and Enforcement (I&E) entered its appearance on May 8, 2017.
By Order entered May 18, 2017, the Pennsylvania Public Utility Commission (Commission) instituted a formal investigation at Docket No. R-2017-2595853 to determine the lawfulness, justness and reasonableness of the Company’s existing and proposed rates, rules and regulations. Original Tariff Water-Pa. P.U.C. No. 5 and Original Tariff Wastewater Pa. P.U.C. No. 16 were thereby suspended by operation of law until January 27, 2018, unless permitted by Commission order to become effective at an earlier date. The case was then assigned to the Office of Administrative Law Judge for investigation, hearing and the issuance of a Recommended Decision. Administrative Law Judges Dennis J. Buckley and Benjamin J. Myers were assigned to the case.
On May 24, 2017, the Pennsylvania American Water Large Users Group (PAWLUG) filed a Complaint. On June 12, 2017, PAWC filed an Answer and New Matter asking that PAWLUG’s Complaint be dismissed, but that request was denied by the presiding officers in an Order issued July 7, 2017.
Petitions to Intervene were filed by AK Steel on June 1, 2017, and the Commission on Economic Opportunity (CEO) on July 13, 2017, which the Company did not oppose and which the ALJs granted in their Orders issued on July 24, 2017 and August 1, 2017, respectively.
In addition to numerous informal Complaints, the following formal Complaints were filed with the Secretary of the Commission: Barbara McDade v. PAWC, Docket No. C-2017-2603050; Noel Netel v. PAWC, Docket No. C-2017-2601550; Theresa Sylvester v. PAWC, Docket No. C-2017-2603078; Dolores Landis v. PAWC, Docket No. C-2017- 2603587; John Hooks v. PAWC, Docket No. C-2017-2603669; Casey Hogan v. PAWC, Docket No. C-2017-2604355; Stockton Alloway v. PAWC, Docket No. C-2017-2604423; Fred Wesner v. PAWC, Docket No. C-2017-2604854; Michael Saville v. PAWC, Docket No. C-2017-2604937; Paul Walaski v. PAWC, Docket No. C-2017-2607003; Gail Purdy v. PAWC, Docket No. C-2017-2607376; Ronald Russo v. PAWC, Docket No. C-2017-2607392; Stephen Schwarz v. PAWC, Docket No. C-2017-2607408; Barry Fenicle v. PAWC, Docket No. C-2017-2607439; Margaret O’Leary v. PAWC, Docket No. C-2017-2607455; Dolores Ferraro v. PAWC, Docket No. C-2017-2608009; Hofmann Industries Inc. v. PAWC, Docket No. C-2017-2608461; Nancy Bruce Harris v. PAWC, Docket No. C-2017-2608964; Raymond Saunders v. PAWC, Docket No. C-2017-2609614; Remedios Leynes v. PAWC, Docket No. C-2017-2609712; Alice Piper v.
PAWC, Docket No. C-2017-2609820; Alfred Kump v. PAWC, Docket No. C-2017-2609834; Angel Pardellas v. PAWC, Docket No. C-2017-2610358; Philip Codelka v. PAWC, Docket No. C-2017-2610380; Ronald Serafin v. PAWC, Docket No. C-2017-2611289; Linda Waddington-Tully v. PAWC, Docket No. C-2017-2611329; David Dulebohn v. PAWC, Docket No. C-2017-2611485; Shannon Brown v. PAWC, Docket No. C-2017-2611572; Maria Salve v. PAWC, Docket No. C-2017-2611604; Michael Pope v. PAWC, Docket No. C-2017-2611968; James McLaughlin v. PAWC, Docket No. C-2017-2612710; Christopher Visco v. PAWC, Docket No. C-2017-2612728; Gerald and Susan Roe v. PAWC, Docket No. C-2017-2615016; Devin Olsen v. PAWC, Docket No. C-2017-2617879; Homer Cote v. PAWC, Docket No. C-2017-2615256; and Scott Whitcomb v. PAWC, Docket No. C-2017-2626474. PAWC filed Answers to all timely filed formal Complaints denying that the proposed rates and terms of service were unjust, unlawful or unreasonable.[1]
A Prehearing Conference was held on May 25, 2017, at which time a schedule was established for the submission of testimony and the dates for evidentiary and public input hearings.
Public input hearings were scheduled and held as follows:
|DATE |LOCATION |START TIME |NUMBER OF WITNESSES THAT TESTIFIED |
|July 24, 2017 |Washington |1:00 P.M. |2 |
|July 24, 2017 |Pittsburgh |6:00 P.M. |0 |
|July 25, 2017 |Uniontown |1:00 P.M. |2 |
|July 27, 2017 |Harrisburg |1:00 P.M. |7 |
| |(“Smart Hearing”) | | |
|July 27, 2017 |New Cumberland (Camp Hill) |6:00 P.M. |4 |
|August 1, 2017 |Wilkes-Barre/Scranton |1:00 P.M. |4 |
|August 1, 2017 |East Stroudsburg |6:00 P.M. |13 |
|August 3, 2017 |East Fallowfield Twp. (Coatesville) |1:00 P.M. |2 |
|August 3, 2017 |Wyomissing (Reading) |6:00 P.M. |10 |
On June 7, 2017, a standard form Protective Order was issued.
Accompanying Original Tariff Water-Pa. P.U.C. No. 5 and Original Tariff Wastewater Pa. P.U.C. No. 16, the Company filed the detailed supporting information required by the Commission’s regulations (52 Pa. Code § 53.52 et seq.) for an historic test year ended December 31, 2016, a future test year ending December 31, 2017 and a fully projected future test year (FPFTY) ending December 31, 2018. In addition, the Company filed the two cost of service studies related to the provision of wastewater service in the Company’s Scranton service area[2] that the Commission directed it to prepare and file in its Final Order at Docket No. A-2016-2537209.[3] The Company’s supporting information included the prepared direct testimony of fifteen (15) initial witnesses and the various exhibits sponsored by them. Considerable additional information was supplied in response to interrogatories and data requests.
In accordance with the previously established schedule, on August 9, 2017, I&E, OCA, OSBA, CEO and AK Steel submitted a total of fourteen (14) written statements and numerous exhibits addressing rate of return, accounting, rate base, operating and maintenance expenses, rate structure/cost allocation, consolidation of water and wastewater revenue requirements and operational and service-related issues. On August 31, 2017, PAWC filed ten (10) statements and various associated exhibits constituting its rebuttal testimony in this case and I&E, OCA, OSBA, PAWLUG and AK Steel submitted a total of five (5) statements of rebuttal testimony. On September 15, 2017, surrebuttal testimony was submitted by I&E (seven statements), OCA (four statements), OSBA (one statement) and AK Steel (one statement).
On September 21, 2017, the active parties notified the judges that a settlement in principle had been reached among all parties represented by counsel.
Hearings to take technical evidence and to allow cross examination of witnesses were originally scheduled to be held September 18, 21-22, 25-26, 2017, in Harrisburg at the Keystone Building. However, in light of the proposed Joint Settlement and the fact that all parties to this proceeding waived cross-examination, one hearing was held on September 26, 2017, for the purpose of entering testimony and exhibits into the record.
The following testimony and exhibits were admitted:
PAWC
PAWC Exhibit 1 (List of PAWC Testimony and Exhibits)
PAWC Stmt. No. 1 (Nevirauskas Direct with PAWC Exhibit 3-A, 3-B, and 3-C 3-B,
3-C)
PAWC Stmt. No. 1-R (Nevirauskas Rebuttal with PAWC Exhibit 3-A revised)
PAWC Stmt. No. 2 (Sheridan - Direct)
PAWC Stmt. No. 2-R (Sheridan - Rebuttal)
PAWC Stmt. No. 3 (Kaufman – Direct with PAWC Exhibits DRK-1, DRK-2 and DRK-3)
PAWC Stmt. No. 3-R (Kaufman - Rebuttal with Exhibits DRK-1R, DRK-2R)
PAWC Stmt. No. 3-R Revised (Kaufman – Revised Rebuttal)
PAWC Stmt. No. 4 (Cox – Direct)
PAWC Stmt. No. 4-R (Cox – Rebuttal with PAWC Exhibits JRC-1R through JRC-4R)
PAWC Stmt. No. 5 (Lontz – Direct)
PAWC Stmt. No. 5-R (Lontz – Rebuttal)
PAWC Stmt. No. 6 (Hawn – Direct)
PAWC Stmt. No. 6-R (Hawn – Rebuttal with Confidential PAWC Exhibits JDH- R through JDH-3R)
PAWC Stmt. No. 7 (Hunnel – Direct)
PAWC Stmt. No. 8 (Grundusky – Direct)
PAWC Stmt. No. 9 (Roach – Direct with PAWC Exhibits GPR-1 through GPR-8)
PAWC Stmt. No. 10 (Wilde-Direct)
PAWC Stmt. No. 11 (Spanos – Direct with PAWC Exhibits 11-A through 11-I)
PAWC Stmt. No. 12 (Herbert – Direct with PAWC Exhibits 12-A through 12-G)
PAWC Stmt. No. 12-R (Herbert – Rebuttal with PAWC Exhibits 12-R-1 through 12-R-3)
PAWC Stmt. No. 13 (Bulkley – Direct with PAWC Exhibit 13A)
PAWC Stmt. No. 13-R ((Bulkley – Rebuttal with PAWC Exhibit 13R)
PAWC Stmt. 14 (Connelly – Direct with PAWC Exhibits 14A through 14F)
PAWC Stmt. 14-R (Connelly – Rebuttal with PAWC Exhibits 14-R-1 and 14-R-2)
PAWC Stmt. 15 (Barrett – Direct with PAWC Exhibit 15-A
PAWC Stmt. 16-R (Abruzzo – Rebuttal with PAWC Exhibits ECA-1R through ECA- 6R)
CEO
CEO Stmt. No. 1 (Brady - Direct)
OCA
OCA Stmt. No. 1 (Smith - Direct)
OCA Stmt. No. 2 (Watkins – Direct)
OCA Stmt. No. 3 (Rubin – Direct)
OCA Stmt. No. 3-R (Rubin – Rebuttal)
OCA Stmt. No. 4 (Fought – Direct)
OCA Stmt. No. 1-SR (Smith – Surrebuttal)
OCA Stmt. No. 2-SR (Watkins – Surrebuttal)
OCA Stmt. No. 3-SR (Rubin – Surrebuttal)
OCA Stmt. No. 4-SR (Fought – Surrebuttal)
OSBA
OSBA Stmt. No. 1 (Kalcic - Direct)
OSBA Stmt. No. 1-R (Kalcic – Rebuttal)
OSBA Stmt. No. 1-S (Kalcic – Surrebuttall)
I&E
I&E Statement No. 1 (Direct testimony of Anthony Spadaccio)
I&E Exhibit No. 1 (Exhibit to accompany the direct testimony of Anthony Spadaccio)
I&E Statement No. 1-SR (Surrebuttal testimony of Anthony Spadaccio)
I&E Statement No. 2 (Direct testimony of D.C. Patel)
I&E Exhibit No. 2 (Exhibit to accompany the direct testimony of D.C.
Patel)
I&E Statement No. 2-SR (Surrebuttal testimony of D.C. Patel)
I&E Exhibit No. 2-SR (Exhibit to accompany the surrebuttal testimony
of D.C. Patel)
I&E Statement No. 3 (Direct testimony of Ethan H. Cline)
I&E Exhibit No. 3 (Exhibit to accompany the direct testimony of Ethan
H. Cline)
I&E Statement No. 3-SR (Surrebuttal testimony of Ethan H. Cline)
I&E Exhibit No. 3-SR (Exhibit to accompany the surrebuttal testimony
of Ethan H. Cline)
I&E Statement No. 4 (Direct testimony of Kokou Apetoh)
I&E Exhibit No. 4 (Exhibit to accompany the direct testimony of Kokou
Apetoh)
I&E Statement No. 4-SR (Surrebuttal testimony of Kokou Apetoh)
I&E Exhibit No. 4-SR (Exhibit to accompany the surrebuttal testimony
of Kokou Apetoh)
I&E Statement No. 5 (Direct testimony of Jeremy B. Hubert)
I&E Exhibit No. 5 (Exhibit to accompany the direct testimony of Jeremy
B. Hubert)
I&E Statement No. 5-SR (Surrebuttal testimony of Jeremy B. Hubert)
I&E Exhibit No. 5-SR (Exhibit to accompany the surrebuttal testimony
of Jeremy B. Hubert)
I&E Statement No. 6 (Direct testimony of Joseph Kubas)
I&E Exhibit No. 6 (Exhibit to accompany the direct testimony of Joseph
Kubas)
I&E Statement No. 6-R (Rebuttal testimony of Joseph Kubas)
I&E Statement No. 6-SR (Surrebuttal testimony of Joseph Kubas)
I&E Exhibit No. 6-SR (Exhibit to accompany the surrebuttal testimony
of Joseph Kubas)
I&E Statement No. 7 (Direct testimony of Brenton Grab)
I&E Exhibit No. 7 (Exhibit to accompany the direct testimony of Brenton Grab)
I&E Statement No. 7-SR (Exhibit to accompany the Surrebuttal testimony of Brenton Grab)
AK STEEL
AK Steel Statement 1 (Baudino – Direct with Exhibit RAB-1)
AK Steel Statement 1-R (Baudino – Rebuttal)
AK Steel Statement SR (Baudino – Surrebuttal)
PAWLUG
PAWLUG Exhibit No. 1-R (Pollock – Rebuttal with Exhibits JP-1 through JP-4)
On October 16, 2017, the active parties filed a proposed Joint Settlement. Also on October 16, 2017, OCA sent a summary of the terms of the proposed Settlement and directions on how to access the proposed Settlement and related documents to each of the pro se Complainants in this case. The OCA advised those parties that any comments with respect to the proposed Settlement were to be submitted to the judges post-marked by no later than October 26, 2017. Also in that letter, parties were notified that access to the Joint Settlement was provided through a website. The letter included a form with which the inactive participants could indicate whether they accepted the settlement, opposed the settlement or had no position.
The following inactive Complainants oppose the Joint Settlement and filed Objections: Fred Wesner, Barry Fenicle, Alice Piper, Casey Hogan, Paul Walaski, Raymond Saunders, Shannon Brown, Esq., Noel Netel, Virginia Cozzi, Linda Waddington-Tully, Michael Saville, Stephen Schwarz, , Christopher Visco, and Ronald Russo.
The following inactive Complainants support the Joint Settlement: Michael Pope and Stockton Alloway.
Among the inactive Complainants who filed the form in opposition to the Settlement, several added specific comments detailing why they objected to the proposed Settlement. The active parties who sponsored the proposed Settlement were afforded an opportunity to file a response or responses to the Objections. On November 3, 2017, PAWC filed a response.
What appeared to be four additional Objections were timely filed but were not communicated to the OALJ by the Complainants. Three of those had statements attached while one was simply a signature page. Although these Objections were largely duplicative of those already filed by those four Complainants, the active parties who sponsored the proposed Settlement were again afforded an opportunity by the presiding officers to file a response or responses to the Objections. Any such response was due by November 13, 2017.
On November 13, 2017, PAWC filed a response to these four additional filings.
A transcript of 385 pages, the Exhibits and Statements listed, above, and Objections and Responses were compiled. The record in this case closed on November 13, 2017 with the filing of the Response of Pennsylvania-American Water Company to the additional Objections to the Joint Petition for Settlement of Rate Investigation.
II. DESCRIPTION OF THE COMPANY
PAWC provides water service to over 641,000 customers. PAWC serves all or portions of the following 36 counties: Adams, Allegheny, Armstrong, Beaver, Berks, Bucks, Butler, Centre, Chester, Clarion, Clearfield, Clinton, Columbia, Cumberland, Dauphin, Fayette, Indiana, Jefferson, Lackawanna, Lancaster, Lawrence, Lebanon, Luzerne, McKean, Monroe, Montgomery, Northampton, Northumberland, Pike, Schuylkill, Susquehanna, Union, Washington, Warren, Wayne and York. PAWC provides wastewater service to the following counties totaling over 17,000 customers: Chester, Clarion, Lackawanna, Monroe, Pike and Washington.
PAWC is an investor-owned water company and a subsidiary of American Water Works Company, Inc. (AWW). In February of 1989, the then-existing Pennsylvania-American Water Company merged with and into Western Pennsylvania Water Company and the surviving Corporation is what is now PAWC. PAWC is individually owned by AWW.
III. PUBLIC INPUT HEARINGS
Consistent with the policy of the Commission to “allow an opportunity for the complete airing of concerns expressed or issues raised by consumers” where “substantial public interest in a rate proceeding has been shown,” public input hearings were held. See 52 Pa.Code § 69.321. In Prehearing Memoranda, the parties proposed public input hearings in various areas served by PAWC. None of the active parties objected to holding these public input sessions. The locations of the public input hearings were determined by the assessments of OCA of the public interest expressed and by agreement of the parties.
In various locations serviced by PAWC, more than 40 people testified.
A. Public Input Hearing Washington, PA
The first of seven public input hearings was held by ALJ Jeffrey Watson at 1:00 p.m. on July 24, 2017, at the Washington County Building in Washington, Pennsylvania. Two individuals testified at this input hearing.
Mary Sally testified as a customer of PAWC and as the Director of Programs of Dollar Energy Fund. Ms. Sally testified that Dollar Energy Fund was a non-profit organization which provided assistance to low-income individuals in relation to certain utilities, including water, and had experienced a good working relationship with PAWC and its efforts to provide utility service to such individuals. (N.T. 38-43.)
Harold Close testified that his home is serviced by a well that does not provide potable water to his family as a result of pipeline construction in the vicinity. As such, he is required to purchase all the water consumed in his household. Mr. Close testified that due to circumstances affecting the well water at his home, and that it could not be used for drinking, he was asking that PAWC extend service to his home. (N.T. 44-47.)
B. Public Input Hearing Pittsburgh, PA
The second public input hearing was held by ALJ Conrad Johnson on July 24, 2017, in Pittsburgh, Pennsylvania at 6:00 p.m. The hearing commenced at the scheduled time. Following introductory statements from the parties present, no one from the public elected to testify at this hearing. This hearing concluded at 6:18 p.m.
C. Public Input Hearing Uniontown, PA
The third public input hearing was held in Uniontown, Pennsylvania by ALJ Mark Hoyer at 1:00 p.m. on July 25, 2017. One person testified.
Patricia Lovelace testified as the H2O Program Coordinator at the Dollar Energy Fund. Ms. Lovelace testified that this program provides important services to low-income individuals including those related to water utilities. She testified that PAWC has been a good partner with her organization for a number of years and that PAWC recognizes and makes efforts to provide assistance and safeguards to vulnerable customers. (N.T. 81-84.)
D. Public Input Hearing Harrisburg, PA
The fourth public input hearing was conducted on July 27, 2017 at 1:00 p.m. in Hearing Room 1 at the Commission’s offices in Harrisburg. This was a “smart hearing” that allowed members of the public to present testimony either in-person or via telephone as the hearing was being livestreamed through the Commission’s website. Seven individuals testified at this hearing.
Barry Fenicle testified that as a result of a number of factors including age and health issues, his household experiences increased water usage. Any additional rate increase would put financial strain on his household’s income. Mr. Fenicle testified that the amount of the rate increase being sought by PAWC was out of line with rate increases granted to other utilities over more extended periods of time and that such an increase was not in line with historic inflation rates. In addition, Mr. Fenicle felt that such a rate increase was unjustified due to continuing water quality issues he experienced in his home and that such an increase would only serve to inflate the salaries of PAWC employees. Mr. Fenicle testified that a rate increase would only serve to cause businesses affected by the increase to pass these costs onto customers who were already struggling to afford necessities such as water. Mr. Fenicle argued that PAWC’s rate increase should be limited to 2%. (N.T. 98-109.)
Fred Woy testified that he has been a resident of Berks County for 20 years. During this time, neighboring communities not served by PAWC have had consistently low water rates while his household has experienced ever increasing costs with PAWC. Mr. Woy testified that as a senior citizen on a fixed income he lives on a budget and PAWC should as well. (N.T. 113-114.)
Gil Freedman testified as the vice president of the Conodoguinet Creek Water Association. Mr. Freedman testified that the association works to ensure quality of the watershed which is helped by contributions and logistical support provided by PAWC. (N.T. 116-118.)
Peter Derrenbacher testified as a customer and the president of Saw Creek Estates Community Association which is comprised of over 2,500 customers of PAWC. Mr. Derrenbacher testified that the community has about 40 miles of paved roads that have been damaged by PAWC during replacement of certain lateral connections. It costs the community approximately $300,000 per year to maintain those roadways. Mr. Derrenbacher testified that PAWC was owned by American Water Company which is the largest investor owned utility in the United States which has realized an increase in stock prices from $16 per share in 2009 to a current value of $80 per share. Mr. Derrenbacher testified that as a result of company strategy which includes regular rate hikes, the company expected continued increases in the value of its shares. Mr. Derrenbacher identified several recommendations to address PAWC’s proposed rate hike: 1) Deny the rate increase as customers are already paying large amounts for water. 2) Place a moratorium on PAWC to freeze new acquisitions until PAWC can demonstrate efficiency and lower costs for ratepayers. 3) Require PAWC to install meters to measure wastewater. (N.T. 122-124.)
Gregory Layton testified as president of the Coatesville Area Arts Alliance and described his long personal knowledge of the area and a reservoir now owned by PAWC. Mr. Layton testified that he was neither for nor against the rate increase proposed by PAWC, but both he and the organizations he has been associated with have had long and productive working relationships with PAWC and in particular improvements PAWC has made to infrastructure and resources in the area. (N.T. 129-135.)
Beverly Snyder testified that she is 80 and a widow and that she has been paying water bills for 50 years at her home. However, even a $10 increase to her water bill would cause her to struggle and she was afraid that she could end up losing her home. Ms. Snyder testified
that increases in other bills such as insurance and yearly property taxes had a cumulative effect on seniors such as herself and that under such financial constraints even $10 greatly affects her budget. Ms. Snyder asked that the economic plight of senior citizens be considered in any proposed rate increase by PAWC. (N.T. 138-139.)
Brian Coppola testified that approximately two years ago a utility was conducting underground boring for a pipeline which resulted in the contamination of his well. After repeated failed attempts by that utility to restore the well, it was decided that Mr. Coppola would need to obtain water through PAWC as the local provider. Mr. Coppola testified that after months of discussions, PAWC was unwilling to cooperate or offer solutions to have water provided to his home. Mr. Coppola testified that despite the fact that the utility involved in the contamination of his well was willing to pay to have him connected to the PAWC system, PAWC would not provide a cost to complete such a project and would only provide repeated reasons why such a connection was not possible or feasible. Mr. Coppola further testified that he had also dealt with PAWC in the past as an elected official in his community and that PAWC had consistently shown disinterest in extending public water mains in his community. As a result, Mr. Coppola indicated that projects that should only take months take PAWC years to complete and that preventing a current rate increase would cause PAWC to be more responsible to consumers. (N.T. 142-147.)
E. Public Input Hearing New Cumberland, PA
This public input hearing was the fifth. It was held on July 27, 2017, at 6:00 p.m. at the New Cumberland Fire Department in New Cumberland, Pennsylvania. Additional time was given for members of the public to arrive at this location due to a previous scheduling issue with the hearing location After allowing additional time, the hearing commenced at 6:20 p.m. at which time four people testified. Clarification of the increase and the effects of the increase upon the customers were core themes.
The first person to testify was Earl Follett. As a PAWC customer, Mr. Follett testified that while the rate increase proposed by PAWC indicated a 17% increase, he believed that based on a copy of the tariff he had obtained the increase he would realize was 26%. (N.T. 156.)
Patrick Leonard testified as a customer and the chief of the Hershey Volunteer Fire Company. Mr. Leonard testified that the fire company has enjoyed a very positive relationship with PAWC for a number of years. (N.T. 158)
Representative Dawn Keefer representing portions of York and Cumberland Counties testified that the PAWC rate increase would affect her constituents living primarily in Fairview Township. (N.T. 159-160.)
Judith Fenicle testified that in 1987 PAWC purchased Riverton Water Company and as a result she became a PAWC customer at that time. Since then, she was required to have certain water treatment devices installed in her home and has experienced concerns regarding the PAWC paperless billing system such as certain fees to make payments online or by check. Ms. Fenicle testified that despite previous promises by PAWC to not raise rates, PAWC continues to do so and it causes a strain on senior citizens who are on fixed incomes. (N.T. 161-164.)
F. Public Input Hearing Wilkes-Barre, PA
The sixth Public Input Hearing was held at 1:00 p.m. on August 1, 2017, on the campus of Kings College in Wilkes-Barre, Pennsylvania. Four persons testified.
First to speak was Christopher Visco. Mr. Visco testified that in addition to a lack of jobs and income, other utilities had also been raising their rates on customers. The rate increase propsed by PAWC would begin in January of 2018 which Mr. Visco testified was a particularly difficult time of year for individuals to make ends meet. Mr. Visco testified that he had learned from PAWC that certain types of assistance is offered to low income households buthe had concerns about such a large increase given that new technologies would provide future savings to PAWC. Mr. Visco stressed that the area is in financial distress and that any rate increase received by PAWC should be over an extended period of time to ease the financial strain on customers. (N.T. 188-192.)
John Maday testified on the behalf of Riverfront Parks Committee. Mr. Maday testified that employees of PAWC were qualified and professional in the commitment to providing safe water. He also testified that PAWC is involved not only in supporting the Riverfront Parks Committee but also other organizations and educational programs in the area. (N.T. 193-196.)
John Walsh testified next. Mr. Walsh stated that he spends his winters in Florida and having just recently returned from that area testified that his water bill in Florida is approximately 50% of the water bill he receives from PAWC. Mr. Walsh submitted an exhibit which was entered into the record without objection. (N.T. 198-199.)
James Straub was the last to testify at this hearing. Mr. Straub testified that he owns a number of properties where he furnishes utilities such as water to tenants. Mr. Straub described concerns he has had with PAWC as far back as 1992 and indicated his latest issue related to fees charged by PAWC each time the water is shut off and then turned back on for a new tenant. Mr. Straub also testified that he had been reporting a nearby water leak to PAWC for approximately two years but it had still not been addressed. (N.T. 200-203.)
G. Public Input Hearing East Stroudsburg, PA
The hearing was held on August 1, 2017, at 6:00 p.m. on the campus of East Stroudsburg University. Thirteen people testified. Of those individuals, ten were residents or worked within the Saw Creek residential community. The remaining three were residents of the Blue Mountain Lake residential community. While each community had their own specific
issues with PAWC and the service they receive, both communities expressed concerns regarding the frequency and magnitude of the proposed rate increase and the negative effects on many of the members of their communities living on a fixed income.
The residents of Saw Creek testified to a variety of quality and service issues within their community. These issues included excessive water pressure which had caused pipes to burst, resulting in property damage, as well as PAWC’s failure to perform adequate or timely repairs to roadways affected by digging. In addition to increased costs a rate increase would impose on those residents, they also testified to water conservation measures they were forced to enact in attempts to lower their bills and that quality issues with the water translated into additional home owner expenses above and beyond a simple rate increase. One resident was required to have her hot water tank serviced on a regular basis as a result of these quality issues while many other residents had incurred additional costs to install devices that would mitigate excessive pressure within their water pipes.
Likewise, the residents of the Blue Mountain Lake identified water quality issues specific to the community. In particular, cloudy and discolored water as a result of excessive levels of magnesium in their water. The residents testified that their water was so discolored at times it discolored their laundry and their pets would not drink it.
H. Public Input Hearing East Fallowfield, PA
This hearing was held on August 3, 2017 at 1:00 p.m. at the East Fallowfield Township Building. Eleven people testified. Eight of these individuals were customers and two testified on the behalf of organizations in which they were involved and which had working relationships with PAWC in the community. Senator Andrew Dinniman also testified on behalf of his constituents in Chester County, who are PAWC customers.
The eight individuals who testified on their own behalf as customers, all objected to any rate increase by PAWC. Virtually all referenced fixed incomes or tight budgets as factors which should be considered with respect to any rate increase. An issue with respect to
discoloration was raised and more than one individual questioned the accuracy and fairness of how the wastewater portion of a bill is determined or calculated. In short, these individuals all testified that the rates they already experience are too high and that allowing any such increase, especially in light of some of the individual concerns, would be inappropriate and far too burdensome on ratepayers.
Senator Dinniman echoed the testimony of his constituents. He testified that while Chester County as a whole is prosperous, certain areas and municipalities do not necessarily share in that prosperity. In those areas, individuals with low or fixed incomes already struggle to make ends meet and while parts of Chester County could afford such a potential rate increase, individuals in other areas certainly could not. Senator Dinniman also expressed concern regarding the frequency and amount of rate increases his constituents have been experiencing. He testified that a proposed rate increase of 3% or 4% would be understandable to most people given other economic conditions such as inflation. However, an increase of almost 17% was not reasonable and not something his constituents could afford or he could support. (N.T. 294-298.)
The remaining two witnesses were Gaye Lynn Criswell and James Jordan who testified on behalf of the Chester County Conservation District and Brandywine Red Clay Alliance respectively.
Ms. Criswell testified that the Conservation District had had a good working relationship with PAWC as a sponsor of the Chester County Envirothon. Ms. Criswell indicated that without PAWC’s financial and volunteer help such a program could not be provided to students within the county. (N.T. 299-300.)
Mr. Jordan testified that he is the Executive Director and CEO of the Alliance which is a steward of the Brandywine watershed. Mr. Jordan testified that PAWC had supported the Alliance’s programs for eleven years and as a result 13,000 students have benefited from the programs that have been offered. Mr. Jordan describe PAWC as a good corporate citizen that always considers the interests of the communities it serves. (N.T. 301-305.)
I. Public Input Hearing Wyomissing, PA
The last public input hearing occurred at 6:00 p.m. on August 3, 2017 in Wyomissing, Pennsylvania. Two persons testified at this hearing.
Dorothy Reilly testified that she had attended several public input hearings in the past that had been well-attended by 100 or more people. Ms. Reilly indicated that the decrease in attendance was potentially due to frustrations felt by customers that regardless of the objections voiced, rate increases seemed to be inevitable. Ms. Reilly further testified that customers are on fixed incomes and unlikely to see much if any increase in their wages while prices continue to rise while the yearly salary of certain PAWC officers was in excess of $2 million in 2016. Ms. Reilly indicated that her water bill is at least double what customers in a neighboring municipality pay and that at times she has experienced water quality issues such as odors in the water supplied by PAWC. (N.T. 348-351.)
William Sheffer also testified and opposed any rate increase. He indicated his opposition stems not only from the fact that he is on a fixed income, but because of concerns he has about service and quality. Mr. Sheffer testified that younger and older people alike are on limited incomes and have no recourse or alternative but to be subject to such increased costs. (N.T. 353-355.)
IV. TERMS AND CONDITIONS OF THE JOINT SETTLEMENT
The Settlement consists of the terms and conditions set forth below. For ease of reference, the paragraph numbering of the Settlement has been preserved as filed:
A. Revenue Requirement
9. Upon the Commission’s approval of this Settlement, but no earlier than January 1, 2018 (see Paragraph 36 below), PAWC will be permitted to charge the rates for water service set forth in the proposed Original Tariff annexed hereto as Appendix A and the rates for wastewater service set forth in the proposed Original Tariff annexed hereto as Appendix B (hereafter, the Settlement Rates). The Settlement Rates are designed to produce additional annual operating revenue of $61.85 million, as shown on the proof of revenues annexed hereto as Appendix C. The Water Original Tariff set forth in Appendix A and the Wastewater Original Tariff set forth in Appendix B have been reviewed by the Joint Petitioners and comply with the terms of the Settlement. The Settlement Rates are designed to produce approximately $719.15
million in total annual combined water and wastewater revenue (including Other Revenue) as shown in Appendix C (Summary of Proof of Revenues).
10. The Joint Petitioners agree that the Company’s originally filed pro forma present rate revenue level has been used to establish the Settlement Rates. The Joint Petitioners specifically agree that this provision is for the purposes of settlement for this case only and does not establish precedent for addressing any alleged impacts of declining per-customer usage for any future PAWC rate cases.
11. In the Company’s next base rate filing, the Company will submit a separate revenue requirement study for each combined sewer system (“CSS”) and will file a cost of service study that separately identifies all storm water costs for CSS operations.
12. The Joint Petitioners acknowledge and agree that the depreciation rates set forth in PAWC Exhibit Nos. 11-C, 11-F and 11-I are appropriate for ratemaking purposes in this case and that the Company will use such depreciation rates to calculate the depreciation expense it records on its regulated books of account.
13. The Joint Petitioners agree that the Settlement Rates reflect the amortizations set forth in Appendix D to the Joint Petition, which includes amortizations of the transaction costs that PAWC recorded in connection with its acquisition of the wastewater utility
assets of the Scranton Sewer Authority (“SSA”) and the Borough of New Cumberland (“New Cumberland”), as well as the costs of the Customer Class Demand Study performed for the Company’s water operations in accordance with the Commission-approved settlement of PAWC’s rate proceeding at Docket No. R-2011-2232243 (“Demand Study”). For settlement purposes, the parties agree that a ten (10) year amortization period shall be employed for the New Cumberland transaction costs and the Demand Study and that a forty (40) year amortization period shall be employed for the SSA transaction costs. The Company will not claim in this or future rate filings an amortization of or return on the acquisition adjustment it recorded in regard to its acquisition of the wastewater assets of the SSA. Additionally, all positive or negative acquisition adjustments that were not previously approved by the Commission and are identified
on Appendix D will not be amortized as either a positive or negative amortization in rates charged to customers in this or future rate filings.
14. As part of this Settlement, the Company has agreed to provide the Commission’s Bureau of Technical Utility Services (“TUS”), BI&E, OCA and OSBA, on or before April 30, 2018, an update to PAWC Exhibit No. 3-C, which will include actual plant additions and retirements by month for the twelve months ending December 31, 2017. On or before April 30, 2019, PAWC will update Exhibit No. 3-C for the twelve months ending December 31, 2018. In PAWC’s next base rate proceeding, the Company will prepare and submit a comparison of its actual expenses and rate base additions for the twelve months ended December 31, 2018 to its projections in this case. However, it is recognized by the Joint Petitioners that this is a black box settlement that is a compromise of the Joint Petitioners’ positions on various issues.
15. The Company will not implement a Distribution System Improvement Charge (“DSIC”) during the calendar year ending December 31, 2018. The first DSIC in 2019 will be effective no earlier than April 1, 2019 based on DSIC-eligible expenditures during January and February 2019. In any event, the Company will not begin to impose a DSIC until the total aggregate gross plant costs (before depreciation or amortization) associated with the eligible property that has been placed in service exceeds the following total aggregate plant costs claimed by the Company in the FPFTY:
Water - $149,660,658 (as shown in detail on Appendix E)
Total Wastewater - $6,770,153 (as shown in detail on Appendix E)
In compliance with the Supplemental Implementation Order entered on September 21, 2016 at Docket No. M-2012-2293611, the amounts shown in Appendix E constitute the baseline of gross plant balances to be achieved in order to restart charges under the Company’s DSIC. This provision relates solely to the calculation of the DSIC during the time that the Settlement Rates are in effect and is not determinative for future ratemaking purposes of the projected plant additions to be included in rate base in a fully projected future test year filing.
16. The Joint Petitioners agree and hereby stipulate that the Company shall use the rate of return on equity (“ROE”) as calculated for water utilities and published in the “Bureau of Technical Utilities Services Report on the Quarterly Earnings of Jurisdictional Utilities” for the most recent quarter for purposes of calculating the ROE component of the Company’s DSIC.
17. The Company will record, for accounting and regulatory purposes, pension expense based on accrual accounting, according to FASB Accounting Standards Codification Topic 715 or “ASC 715” (formerly Statement of Financial Accounting Standards 87). In addition, the Company will establish a 10-year amortization of its deferred pension liabilities on its books at December 31, 2017. Nothing in this Settlement precludes any party from contesting the Company’s pension expense claim and associated ratemaking effects in its next base rate case.
18. The Company will remove from utility plant in service $12 million claimed for Scranton wastewater easements to be acquired. Only when the easements are acquired and transferred to the Company will the Company record them to utility plant in service. Any costs incurred to acquire easements associated with assets acquired from the SSA above $12 million will not be claimed in future rate filings. The Company may establish a regulatory asset, for accounting purposes only, in an amount not to exceed $12 million. The regulatory asset will be reduced by the amount of Scranton wastewater easements recorded to utility plant in service. The Company will not claim any portion of the regulatory asset as an addition to rate base or as an expense for ratemaking purposes. All parties shall have the right to challenge the reasonableness and prudency of the costs incurred to acquire the Scranton wastewater easements.
19. The Company has the right to request Commission approval to defer any annual fees paid to the Pennsylvania Department of Environmental Protection set forth in proposed 25 Pa. Code § 109.1401 (PAWC Exhibit ECA-1R, 47 Pa. Bulletin 4986, 5039 (Aug
26, 2017)) to record those costs when they occur as a regulatory asset, and claim such costs for recovery in the Company’s next base rate filing. Any party has the right to oppose such request.
20. The Company agrees to make an allocation of common costs between water and wastewater operations in its next base rate filing. This includes, but is not limited to, an allocation to the revenue requirement for wastewater operations of costs charged to PAWC from American Water Works Service Company
B. Base Rate Stay-Out
21. PAWC will not file for another general rate increase under Section 1308(d) of the Public Utility Code for its existing water operations, wastewater operations excluding Scranton wastewater or Scranton wastewater operations prior to March 31, 2020. However, if a legislative body or administrative agency, including the Commission, orders or enacts fundamental changes in policy or statutes which directly and substantially affect the Company’s rates, this Settlement shall not prevent the Company from filing tariffs or tariff supplements to the extent necessitated by such action.
C. Act 40 of 2016
22. Section 1301.1(a), 66 Pa.C.S. § 1301.1(a), which was added to the Public Utility Code by Act 40 of 2016, provides in relevant part that a utility’s federal income tax expense shall be calculated on a “stand-alone” basis for ratemaking purposes. As a consequence,
consolidated tax adjustments would no longer be reflected in calculating income tax expense for ratemaking purposes. Section 1301.l(b), 66 Pa.C.S. § 1301.1(b), deals with the use of amounts representing a “differential” calculated by reference to Section 1301.1(a).
23. The level of revenue requirement included in this Settlement reflects the resolution of the parties’ positions in the dispute regarding 66 Pa.C.S. § 1301.1(a). The Company submitted, in its response to Filing Requirement IV.14 (marked as confidential), a
calculation of what its consolidated tax adjustment would be in this case. That amount of $4.4 million, identified in PAWC Statement No. 10 (page 4), was not contested by any party.
24. The parties acknowledge that issues regarding the impact of 66 Pa.C.S. § 1301.1 on the treatment of federal and state income tax deductions in calculating DSIC charges are currently being litigated before the Commission in Petition of Metropolitan Edison Co., et al., for Approval of a DSIC, Docket Nos. P-2015-2508942, P-2015-2508936, P-2015-2508931, and P-2015-2508948 (“Petition of Met-Ed”). The Company will not contest the right of a party to raise issues regarding the impact of 66 Pa.C.S. § 1301.1 on the treatment of federal and state income tax deductions in calculating DSIC charges by filing a complaint against the Company’s first quarterly DSIC charge filed after the resolution of the Petition of Met-Ed or by filing a pleading to initiate a generic proceeding.
D. Low-Income Issues
25. The low-income customer charge discount for residential water customers will be increased from 80% to 85%, as reflected in the Settlement Rates. In addition, for its wastewater operations, the Company agrees to increase the residential low-income discount from 15% to 20% of the wastewater bill for qualifying low-income wastewater customers. The Company intends to continue to use community-based organizations to assist in the implementation of its low-income assistance programs.
26. The Company’s annual contribution to its hardship grant program will be increased from its current level of $300,000 to $400,000 for water operations and from $10,000 to $50,000 for wastewater operations. In accordance with current practice, such contribution will be recorded as a “below the line” expense and will not be claimed by PAWC for recovery in its rates. This term of the Settlement is set forth for information purposes, and the Commission’s approval of this term is not requested.
E. Service-Related Issues
27. With regard to service-related issues, in response to concerns raised by the OCA in its testimony in this case and by customers at the Public Input Hearings, the Company will take the actions as set forth in Appendix F to this Joint Petition.
F. Unaccounted-for Water
28. In its next water base rate filing, the Company will include, and serve upon BI&E, OCA and OSBA, copies of the Section 500 sheet of its Annual Report, in live Excel format, for each water operational district for the three preceding reporting years ending prior to the date of the Company’s filing.
G. Street Sweeping Within the City of Scranton and the Borough of Dunmore
29. The Company agrees to prepare an agreement between the Company and the City of Scranton and the Borough of Dunmore (the “Municipalities”) to memorialize its existing cooperative arrangement with the Municipalities explained in the Rebuttal Testimony of Company witness Kaufman (PAWC St. 3-R, pp. 12-13), which shall provide that: (1) the Company will have regular periodic meetings with the Municipalities; (2) at such meetings the Company will discuss and provide input regarding the Municipalities’ street sweeping schedules, identify priority areas for street sweeping and also identify areas that need additional street sweeping by the Municipalities; and (3) the Company is responsible for cleaning out catch basins that are within the combined sewer system to remove grit and other material. The Company
agrees to submit an agreement meeting the foregoing criteria (the “Agreement”) to the Municipalities within three months of the date the Settlement Rates become effective pursuant to
a Final Order of the Commission approving the Settlement. The Company further agrees to use its best efforts to obtain the execution of the Agreement by the Municipalities within a reasonable period thereafter, provided, however, that the Company will not be required to enter into the Agreement if the Municipalities require terms or conditions in addition to those set forth above that are not acceptable to the Company.
30. Within thirty days of the execution of the Agreement by all parties to the Agreement, the Company will file a copy of the Agreement with the Commission for approval under Section 507 of the Public Utility Code, 66 Pa.C.S. § 507. Nothing set forth herein will preclude any Settling Party from raising, in the docket initiated by the filing of the Agreement, any issues regarding whether the Agreement complies with the terms of the Settlement and satisfies the requirements of Section 507 for approval by the Commission, nor will it preclude any party from asserting a claim in a subsequent base rate proceeding that the terms of the Agreement should be revised or that costs claimed by the Company should be disallowed pursuant to a Commission mandated revision to the Agreement or for the Company’s failure to comply with the terms of the Agreement.
31. Additionally, and also consistent with Mr. Kaufman’s Rebuttal Testimony, the Company will not claim for recovery from customers any charges the Municipalities may seek to impose upon the Company for street sweeping.
H. Formal Complaint of Stockton Alloway
32. Mr. Stockton Alloway filed a Formal Complaint that raised concerns regarding the fixed rate he is charged for wastewater service provided by the Company in the Coatesville wastewater operations. Mr. Alloway is a wastewater customer, but not a water customer of the Company and, therefore, there are no metered water data for Mr. Alloway and he is charged the flat rate set forth in the Company’s tariff. Mr. Alloway is a single individual and has argued that his actual wastewater usage is significantly lower than the average customer
usage that is used to develop the fixed wastewater rate. The Company agrees to create a limited pilot program to address, and develop information about, the kinds of concerns raised by Mr. Alloway’s Formal Complaint. If technically feasible, the Company will install, at the Company’s cost, a meter on Mr. Alloway’s well to measure his actual usage. The Company will bill Mr. Alloway’s wastewater service under its metered wastewater rates according to his actual metered water usage instead of the fixed rate charge.
I. Main Extensions
33. The Company agrees to invest $2.2 million to construct water main extensions under and pursuant to Rule 27.1(F) of its water tariff, which authorizes main extensions to be installed without customer contributions subject to Commission approval in order to address health and safety concerns. A portion of the $2.2 million investment will be used to install the water main extensions identified in Appendix G annexed hereto, subject to the additional terms and conditions set forth therein. The Company will work with the OCA and other interested parties to identify additional main extensions that satisfy the criteria of Tariff Rule 27.1 (F) and will use the remaining committed investment to construct such main extensions under and pursuant to Tariff Rule 27.1. With respect to the foregoing commitments, the following terms and conditions also apply:
a. The Company and the OCA will work together to establish a reasonable timeframe for the completion of the projects identified in Appendix G and such other projects that are within the scope of the Company’s committed investment once the specifications for such projects are known.
b. The Company shall apply least-cost principles in designing and constructing the main extensions that are within the scope of its commitments in this Settlement.
c. The Commission’s approval of this Joint Petition will constitute the approval required under Tariff Rule 27.1(F) to construct the projects identified in Appendix G.
d. PAWC agrees to continue to use its best efforts to apply for grants from applicable local municipalities and to receive contributions from other sources, such as from Marcellus Shale drilling companies, in order to mitigate the cost for the main extension projects identified in Appendix G and other projects that are within the scope of its commitments in this Settlement. To the extent any grants are received, they will
not diminish the Company’s commitment to invest $2.2 million for main extensions that meet the criteria of Tariff Rule 27.1(F) pursuant to this Settlement but, instead, will enable the Company to fund additional projects under Tariff Rule 27.1(F).
e. The Joint Petitioners agree that the provisions set forth in Paragraph 33 and Appendix G are not precedential as to conditions that might validate the application of Tariff Rule 27.1(F) in the future and shall not be cited as such in any subsequent proceeding.
f. The Company agrees to continue working with interested parties to refine its existing process for systematic evaluation of main extension requests to ameliorate, by the application of Tariff Rule 27.1 (F), documented health and safety problems that exist within its service territory because of the inadequate quantity or quality of property owners’ individual well water supplies. This will include discussion of specific measures to ensure that requests that may qualify under Tariff Rule 27.1(F) are identified accurately and timely.
J. Cost Allocation and Rate Design
34. The Settlement Rates set forth in Appendix A reflect the Joint Petitioners’ agreement with regard to water rate structure, rate design and the distribution of the increase in revenues in this case, as follows:
a. Under the Settlement Rates, the Rate Zone 1 5/8-inch customer charge for the residential customer class will be $16.50 per month in lieu of the $18.50 customer charge proposed by the Company. The same percentage increase as that for 5/8 inch meters will be applied to the customer charges for all other meter sizes and classes of customers in Rate Zone 1, except for the Industrial class. The 5/8-inch customer charge for the Industrial class in Rate Zone 1 under the Settlement Rates will be $24.50, and the same percentage increase will be applied for all other meter sizes.
b. Rate Zone 50 is being consolidated with Rate Zone 1 under the Settlement Rates.
c. Rate Zones 40, 41, 46, 47 and 51 have been consolidated into a new Rate Zone 2. The customer charges have been equalized with Rate Zone 1. The usage charge for all classes will be $0.900 per 100 gallons. However, for customers in the former Rate Zone 40 (Nittany), the $0.900 rate will be phased-in over two years with increases occurring in January 2018 and January 2019.
d. Rate Zone 52 has been renamed as Rate Zone 3 and its customer charges have been equalized with Rate Zone 1. The usage charge for all classes will be phased into $0.5000 per 100 gallons with increases occurring in January 2018 and January 2019.
e. Appendix H contains billing comparisons showing the impact on the bill of an average customer in each major general service rate class if the Settlement Rates are approved.
f. The Company agrees to hold a non-binding collaborative with PAWLUG and any other Joint Petitioners that express an interest in participating to discuss rate designs for high-usage customer accounts that are not part of the Industrial class. The Company will not be required to propose any changes to its current rate structure and rate design in a future rate case based on the discussions held as part of the non-binding collaborative. While the collaborative shall be similarly non-binding on all participants, any Joint Petitioner may independently propose modifications to PAWC’s rate structure or rate design based on discussions or information exchanged through the collaborative.
35. The Settlement Rates set forth in Appendix B reflect the Joint Petitioners’ agreement with regard to wastewater rate structure, rate design and the distribution of the increase in revenues in this case, as follows.
a. The Company currently has twelve (12) wastewater rate zones, one of which is the Scranton wastewater operations that the Company acquired from SSA. Under the Settlement Rates, the existing wastewater rate zones will be reduced to five. Existing wastewater Rate Zones 2, 3, and 6-10 will be consolidated with wastewater Rate
Zone 1. The other four rates zones will consist of new Rate Zone 2 (New Cumberland), new Rate Zone 3 (Scranton), Rate Zone 4 (Koppel) and Rate Zone 5 (Franklin).
b. For Rate Zones 1-4, most customers receiving wastewater service are also water customers of the Company, and for such customers, the Settlement Rates provide for a customer charge and for volumetric charges to be based on the customers’ water usage, which is consistent with the design of the current rates for customers in those the rate zones. For customers in Rate Zones 1-4 that are not water customers of the Company and for all customers in Rate Zone 5, none of whom are water customers of the Company, the Settlement Rates provide a flat rate charge. The Settlement Rates for all classes of customers and classes of wastewater service for Rate Zones 1-5 are set forth in the applicable portions of the Wastewater Tariff attached as Appendix B.
c. Appendix I contains billing comparisons showing the impact on the bill of an average customer in each major rate class if the Settlement Rates are approved.
d. Combined Water and Wastewater Revenue Requirement: Pursuant to Section 1311(c) of the Public Utility Code and the Commission’s Implementation Order in Docket No. R-2013-2355276, under the Settlement Rates a portion of the wastewater revenue requirement totaling $4,700,000 is being allocated to water customers, as shown in Appendix C, Water Operations, Schedule 10. Of this amount, $2,317,000 is attributable to a portion of the Scranton wastewater revenue requirement and $2,383,000 is attributable to a portion of the revenue requirement of Company’s wastewater operations excluding Scranton.
K. Effective Date
36. The Joint Petitioners agree to exercise their best efforts to obtain approval of this Settlement by the Commission on or before December 7, 2017, and the implementation of the Settlement Rates on January 1, 2018, which is the beginning of the rate year. Upon the entry of a Commission Order approving this Joint Petition, the Company will be permitted to file a tariff for water service, in the form attached hereto as Appendix A, and a tariff for wastewater service, in the form attached hereto as Appendix B, to become effective on January 1, 2018 upon less than statutory notice. The changes outlined in the Company’s interrogatory responses identified in the direct testimony of OCA witness Scott Rubin’s direct testimony have been reflected in the proposed Original Tariffs for water service and wastewater service, provide as Appendix A and Appendix B, respectively.
V. DISCUSSION
A. Applicable Law
The purpose of this investigation is to establish rates for PAWC customers which are “just and reasonable” pursuant to Section 1301 of the Public Utility Code, 66 Pa.C.S. § 1301.
A public utility seeking a general rate increase is entitled to an opportunity to earn a fair rate of return on the value of the property dedicated to public service. Pennsylvania Gas and Water Co. v. Pa. Pub. Util. Comm’n, 341 A.2d 239 (Pa. Cmwlth. 1975). In determining what constitutes a fair rate of return, the Commission is guided by the criteria set forth in Bluefield Water Works and Improvement Co. v. Public Service Comm’n of West Virginia, 262 U.S. 679 (1923) and Federal Power Comm’n v. Hope Natural Gas Co., 320 U.S. 591 (1944). In Bluefield the United States Supreme Court stated:
A public utility is entitled to such rates as will permit it to earn a return on the value of the property which it employs for the convenience of the public equal to that generally being made at the same time and in the same general part of the country on investments in other business undertakings which are attended by corresponding risks and uncertainties; but it has no constitutional right to profits such as are realized or anticipated in highly profitable enterprises or speculative ventures. The return should be reasonably sufficient to assure confidence in the financial soundness of the utility and should be adequate, under efficient and economical management, to maintain and support its credit and enable it to raise the money necessary for the proper discharge of its public duties. A rate of return may be too high or too low by changes affecting opportunities for investment, the money market and business conditions generally.
Bluefield Water Works and Improvement Co. v. Public Service Comm’n of West Virginia, 262 U.S. 679, 692-3 (1923).
Commission policy promotes settlements, 52 Pa.Code § 5.231. Settlements lessen the time and expense the parties must expend litigating a case and at the same time conserve administrative hearing resources. The Commission has indicated that settlement results are often preferable to those achieved at the conclusion of a fully litigated proceeding. 52 Pa.Code § 69.401. Rate cases are expensive to litigate and the cost of such litigation at a reasonable level is an operating expense recovered in the rates approved by the Commission. This means that a settlement, which allows the parties to avoid the substantial costs of preparing and serving testimony and the cross-examination of witnesses in lengthy hearings, the preparation and service of briefs, reply briefs, exceptions and reply exceptions, together with the briefs and reply
briefs necessitated by any appeal of the Commission’s decision, yields significant expense savings for the company’s customers. That is one reason why settlements are encouraged by long-standing Commission policy.
In order to accept a settlement, the Commission must determine that the proposed terms and conditions are in the public interest. Pa. Pub. Util. Comm’n v. York Water Co., Docket No. R-00049165, (Commission Opinion and Order entered October 4, 2004); Pa. Pub. Util. Comm’n v. C. S. Water and Sewer Assoc., 74 Pa. P.U.C. 767 (1991).
This Recommended Decision is prepared for the Commission to act in accordance with Section 1308(d) of the Public Utility Code, which states in pertinent part,
Whenever there is filed with the commission by any public utility … any tariff stating a new rate which constitutes a general rate increase, the commission shall promptly enter into an investigation and analysis of said tariff filing and may by order setting forth its reasons therefore, upon complaint or upon its own motion, upon reasonable notice, enter upon a hearing concerning the lawfulness of such rate, and the commission may, at any time by vote of a majority of members of the commission serving in accordance with law, permit such tariff to become effective, except that absent such order such tariff shall be suspended for a period not to exceed seven month from the time such rate would otherwise become effective. Before the expiration of such seven-month period, a majority of members of the commission serving in accordance with law, acting unanimously, shall make a final decision and order, setting forth its reasons therefore, granting or denying, in whole or in part, the general rate increase requested.
66 Pa.C.S. § 1308(d).
B. Analysis
The Joint Settlement is predicated on an agreement among the active parties that PAWC needs an increase in rates at the level agreed to by those parties. We accept that conclusion.
We must now address whether the Joint Settlement is in the public interest.
This is a “black box” settlement and therefore, unless specifically addressed, the Joint Settlement does not reflect agreement upon individual issues. As stated by I&E in its supporting statement, line by line identification and ultimate resolution of each and every revenue related issue in the proceeding is neither necessary nor possible in assessing whether the Joint Settlement is in the public interest. As presiding officers, we assess the results of the Joint Settlement as a representation of the best efforts of the active parties to arrive at an equitable result that is in the public interest. The fact that this is a unanimous and uncontested Settlement among the active parties, including the public advocates (I&E, OCA and OSBA), factors heavily in this. As stated by PAWC in its Supporting Statement:
Significantly, three of the signatories — I&E, OCA, and OSBA —are charged with specific legal obligations to carefully scrutinize all aspects of a utility's request to increase rates. I&E, which has the broadest mandate, functions as an independent prosecutorial bureau within the Pennsylvania Public Utility Commission and, as such, is charged with representing the public interest in utility rate proceedings. The OCA has a statutory obligation to protect the interests of consumers of public utility service. And the OSBA represents the interests of small businesses. As evidenced by their active and extensive
participation in all aspects of this case, these statutory parties have conscientiously and rigorously discharged their statutory obligations. The statutory parties joining in, and fully supporting, the Settlement is strong evidence that the Settlement's terms and conditions are just, reasonable and in the public interest. PAWC Statement in Support at 2-3.
We accept that in settling this case, all of the parties believe that further litigation probably would not lead to a better, comprehensive result. While we have a number of concerns that will be set forth in this Recommended Decision, those concerns are not sufficient to warrant rejection of the Joint Settlement as offered by the parties.
Further, the Commission favors settlements. See Pa. Pub. Util. Comm’n v. Wellsboro Company, Docket No. R-2010-2172662, Pa. Pub. Util. Comm’n v. Citizens Electric Company of Lewisburg, PA, Docket No. R-2010-2172665.
a. Opposition to the Joint Settlement
As noted in the History of the Proceeding, above, a number of inactive Complainants opposed the Joint Settlement by filing the Objection forms provided by the OCA. A total of 14 Complainants returned forms post-marked by October 30, 2017, indicating that they opposed the Joint Petition for Settlement. Most, but not all, provided comments outlining the basis for their opposition.
In the interest of fairness, the presiding officers provided copies of the Objections to the active parties and offered an opportunity for the parties to file a response or responses. On November 3, 2017, PAWC provided a reply to the statements in opposition to the Joint Settlement. Several of the timely filed Objections were not provided to the presiding officers in time to be included with the first group of Objections. Although the second group of filings appear to be largely duplicative of those originally filed by Messrs. Russo, Saville, Walaski and Brown, the active parties were afforded an additional opportunity to file any response to those late-received Objections by November 13, 2017. PAWC filed an additional response on November 13, 2017.
In considering whether the Joint Settlement is in the public interest, we have considered the opposition of inactive Complainants and offer the following summary and analysis:
1. Ronald Russo – Docket No. C-2017-2607392
Mr. Russo did not provide any comments regarding the basis of his opposition.
2. Noel Netel – Docket No. C-2017-2601550
Mr. Netel indicated that he did not believe a 39.62% increase to his household bill was acceptable or that the average monthly household usage of 3,360 gallons was realistic. Mr. Netel indicated that he has a household of three and his average monthly usage is double that amount and as a result his monthly bill would increase by $30 just for wastewater.
3. Casey Hogan – Docket No. C-2017-2604355
Ms. Hogan indicated that customers in the economically depressed Coatesville area already pay the highest rate for water and wastewater and struggle to pay the current rates. Any increase in rates would only pose additional hardship on customers.
4. Fred Wesner – Docket No. C-2017-2604854
Mr. Wesner indicated that PAWC has meters installed to verify individual customer usage however he questioned why he is billed for an average monthly usage of 3,360 gallons when his average monthly usage has never exceeded 1,800 gallons. Mr. Wesner indicated that customers should be billed for actual usage.
5. Michael Saville – Docket No. C-2017-2604937
Mr. Saville indicated that PAWC has a history of requesting large rate increases however, when a compromise is reached and a lower rate increase is implemented, even that lower increase is too large for customers to pay.
6. Paul Walaski – Docket No. C-2017-2607003
Mr. Walaski indicated that PAWC has consistently failed to provide drinkable water to customers and that upgrades to the water system were simply periodic maintenance. Mr. Walaski did not feel a rate increase is warranted.
7. Stephen Schwarz – Docket No. C-2017-2607408
Mr. Schwarz indicated that PAWC had initially requested an outrageous rate increase and the proposed Settlement only slightly reduces the unconscionable rate increase. Mr. Schwartz did not feel that the Commission properly investigates whether rate increases are
justified and that a monopoly such as PAWC should not be permitted to arbitrarily establish rates.
8. Raymond Saunders – Docket No. C-2017-2609614
Mr. Saunders objected to any rate increase because PAWC customers already pay the highest rates compared to surrounding states. He is on a fixed income and such increases are unfair to customers in his economic circumstance.
9. Alice Piper – Docket No. C-2017-2609820
Ms. Piper indicated that even the rate increase contained in the proposed Settlement would cause a hardship on all seniors on a fixed income and potentially result in their inability to maintain their living status. Ms. Piper also indicated that water quality to her home was poor.
10. Linda Waddington-Tully – Docket No. C-2017-2611329
Ms. Waddington-Tully indicated that the rate contained in the proposed Settlement was still too high for a necessity such as water.
11. Virginia Cozzi – Docket No. C-2017-2608986
Ms. Cozzi raised two objections to the proposed Settlement. First, customers such as herself already pay extremely high water rates and even the proposed 9.41% rate increase, while lower than the initially proposed 16.4% rate increase, is still too high. Second, Ms. Cozzi is a senior citizen whose income has not increased in many years. She also does not believe that working people receive salary increases of over 2%. Her water bill is already a hardship and an increase of 9.41% will make it almost impossible for her to keep up. Ms. Cozzi indicated that PAWC’s costs should be spread out over a longer period of time.
12. Christopher Visco – Docket No. C-2017-2612728
Mr. Visco raised several objections to the proposed Settlement. He indicated that interest gained from monies kept in various PAWC accounts should be utilized as excess funds to defray certain costs, thereby presumably relieving costs to customers. Mr. Visco also indicated that municipalities within the PAWC service territory have experienced decreases in population over the years, leaving customers who remain with the burden of higher costs. As a result, PAWC’s rate increase would only serve to perpetuate that decline and shift the burden to fewer and fewer customers.
13. Barry Fenicle – Docket No. C-2017-2607439
Mr. Fenicle raised various objections to the proposed Settlement. In addition to reiterating much of his previous testimony and the testimony of other members of the public, he identified five specific conditions he felt should be included in the proposed Settlement: 1) The rate increase should be limited to a 2% - 3% increase for all customer classes; 2) A prohibition against additional rate increases for five years; 3) A prohibition against PAWC mandating that individuals connect to their system; 4) A prohibition against PAWC from preventing individuals and businesses from installing wells; 5) A prohibition against PAWC from acquiring additional water or wastewater systems.
14. Shannon Brown, Esq. – Docket No. C-2017-2611572
Mr. Brown raised various reasons for his opposition to the proposed Settlement including a belief that PAWC had failed to support its case that a rate increase was in order or that the dividend practice of its parent company could support such an increase. Mr. Brown also felt that the proposed Settlement violated both state and federal equal protection laws and that a two-year bar on additional rate increases fails to adequately protect customers. Mr. Brown felt that PAWC’s record of service quality and infrastructure upgrades are duties imposed on PAWC as a public utility and do not support a basis for a rate increase. For all of those reasons, Mr. Brown requested that any such rate increase be denied.
Two of the Objections, including Mr. Brown’s, raise particular concerns.
First, the Objection filed by Barry Fenicle strongly implies that the negotiations that led to the Settlement were not conducted in good faith, and that the presiding officers prejudged this case. Mr. Fenicle also believed that he would be supported at the public input hearing by other PAWC ratepayers. Those individuals did not appear, and in his Objection Mr. Fenicle states that they did not do so because they felt “coerced” by PAWC. In its response, PAWC points out the lack of verifiable facts for any of Mr. Fenicle’s claims and categorically denies that it discouraged public testimony and participation at public input hearings in any way. There has never been evidence presented to support the contention that the active parties did not deal in good faith, that prejudgment has occurred, or that PAWC’s conduct has been in any way discreditable.
With respect to the Objection of Shannon Brown, in its response PAWC brought to the attention of the presiding officers that on July 28, 2017, Mr. Brown filed a Petition to Withdraw his Complaint. As the presiding officers were never served with that Petition, its existence was unknown to us and not ruled on. The Petition to Withdraw notwithstanding, Mr. Brown filed an extensive Objection to the Joint Settlement. PAWC asks that the presiding officers grant the Petition to Withdraw nunc pro tunc, dated August 7, 2017. To do otherwise, PAWC argues, would be to reward Mr. Brown for his failure to comply with the Commission’s procedural regulations and the Prehearing Orders of the presiding officers. PAWC also argues that Attorney Brown’s Objections should be disregarded or stricken for the additional reason that they are an improper and untimely attempt to introduce factual matter in contravention of the procedures and schedule that controls in this case.
Attorney Brown’s Objection is not supported by evidence of record in this case. We understand PAWC’s request that the original Petition to Withdraw his Complaint filed by Attorney Brown should be granted nunc pro tunc. At this late date, however, we decline to do so. But we
find that Attorney Brown’s Objection relies on extra-record factual assertions and citations to documents that are not in evidence.
We have considered all of the comments made both at public input hearings and in the Objections that rate increases are a financial burden. We will offer further thoughts on this in our disposition of the Joint Settlement, below. However, assertions, personal opinions or perceptions do not constitute factual evidence. Pennsylvania Bureau of Corrections v. City of Pittsburgh, 532 A.2d 12 (Pa. 1987). In sum, we are certain that the Objections to the Joint Settlement filed by the Complainants are based on sincere opinions that the Joint Settlement and the rates therein are not in the public interest. However, we agree with PAWC in its responses that none of the Objections to the Joint Settlement cite any fact, or facts, established of record that would incline us to reject or to modify the Joint Settlement.
b. Statements in Support
Two of the pro se Complainants contacted by OCA returned forms indicating that they wished to join in the Joint Petition for Settlement, however they did not provide additional comments or statements for their support. Those individuals are:
Michael Pope – Docket No. C-2017-2611968
Stockton Alloway – Docket No. C-2017-2604423
No active party opposed the Joint Settlement. Instead, the active parties filed Statements in Support of the Joint Settlement organized in the same order of issues as the Joint Settlement itself. Consequently, the Statements in Support are naturally somewhat duplicative, varying principally in references to the testimony of a specific party’s witness(s). The Statements in Support of the Joint Settlement are an integral part of our determination of whether the Joint Settlement is in the public interest, and while each Statement speaks for itself, we offer the following summary:
1. I&E
I&E submits that the proposed Settlement is in the public interest and requests that it be approved by the ALJs and the Commission without modification. I&E Statement of Support at 2.
I&E states that the issues raised by I&E have been satisfactorily resolved through discovery and discussions with the parties and are incorporated in the Joint Petition. I&E represents that the Settlement satisfies all applicable legal standards and results in terms that are preferable to those that may have been achieved at the end of a fully litigated proceeding. I&E Statement of Support at 5-6.
With respect to operating revenue, at the outset of this case, PAWC requested an increase in annual operating revenues of $107.9 million, or approximately 16.4%. However, pursuant to the Joint Petition, the Settlement Rates are designed to produce additional annual operating revenue of $61.85 million. I&E supports the Settlement because it represents over a $46 million savings for PAWC customers. Ratepayers will continue to receive safe and reliable service at just and reasonable rates while allowing PAWC sufficient additional revenues to meet its operating and capital expenses and providing the opportunity to earn a reasonable return on its investment. I&E Statement of Support at 6-7.
I&E points out that the Company has agreed that in its next base rate filing, it will submit a separate revenue requirement study for each combined sewer system and will file a cost of service study that separately identifies all storm water costs for combined sewer system operations. I&E contends that PAWC's agreement to submit a separate revenue requirement for each combined sewer system and to file a cost of service study to separately identify all storm water costs is in the public interest because it will provide information available in the form necessary to enable the Commission to properly allocate costs and determine just and reasonable rates in PAWC's next base rate case. From I&E's perspective, this Settlement term was essential because without it, the Commission's ability to evaluate any cost spreading from the perspective of cost causation could be compromised. However, pursuant to the Settlement, the studies and information will be available to the Commission and will preserve future ratemaking options. I&E Statement of Support at 9-11.
I&E supports the Joint Petition which provides that while the Settlement Rates reflect the amortization of transaction costs related to PAWC's acquisition of the Sewer Authority of the City of Scranton (SSA) and the Borough of New Cumberland, which will be amortized at 40 years and 10 years, respectively, PAWC will not claim an amortization of or a return on the acquisition adjustment it recorded for its acquisition of the SSA assets. Additionally, with regard to the fourteen other positive or negative acquisitions at issue in this proceeding, PAWC has agreed not to amortize these as either a positive or negative amortization in rates charged to customers in this case or in its future rate filings. This term regarding the acquisition adjustments, and especially as it pertains to the SSA acquisition adjustment, was a critical part of I&E's willingness to join in the Settlement. I&E Statement of Support at 11, 14-15.
From I&E's perspective, the Joint Petition's provision indicating that PAWC will not claim an amortization of or return on the SSA acquisition adjustment substantially benefits the public interest. PAWC's ratepayers will now be shielded from the substantial rate impact that would have resulted from the treatment proposed in PAWC's filing. PAWC has agreed not to amortize the remaining acquisition adjustments, as either a positive or negative amortization in rates charged to customers in this case or in its future rate filings. I&E Statement of Support at 14-15.
I&E sought to have PAWC provide interim reports until the filing of the next base rate cases in order to be able to timely review and verify the status of the its rate base projections with respect to the Fully Projected Future Test Year (FPFTY). The Settlement specifies the Exhibits that will be updated for the twelve months ended December 31, 2017 and December 31, 2018. In addition, PAWC agreed to provide, as a part of the next base rate case, a comparison of its actual expenses and rate base additions for the twelve months ended December 31, 2018 to its projections in this case. Accordingly, I&E fully supports the Settlement term because it achieves I&E's goal of timely receiving data sufficient to allow for the evaluation and confirmation of the accuracy of the projections in its next base rate filing. I&E Statement of Support at 15-16.
In accordance with the Settlement, PAWC will not will not implement a DSIC during the calendar year ending December 31, 2018. Additionally, the first DSIC in 2019 will be effective no earlier than April 1, 2019 and it will be based on DSIC-eligible expenditures during January and February 2019. Additionally, PAWC has agreed to impose its DSIC in a manner that is consistent with the Commission's Supplemental Implementation Order at Docket No. M-2012-2293611. I&E avers that this term is in the public interest because it benefits both PAWC and its ratepayers. PAWC benefits because it will have access to DSIC funding for necessary infrastructure improvement, which will facilitate its obligation to maintain adequate, efficient, safe, and reasonable service and facilities. PAWC's customers will benefit because pursuant to this term, they will not need to fund the DSIC until April 1, 2019, at the earliest. Accordingly, ratepayers will experience relief from paying DSIC costs for a fixed period of time, but even when the charge becomes effective, these customers will benefit from the safe and effective service that is facilitated through improved infrastructure. I&E Statement of Support at 16-17.
PAWC will record, for accounting and regulatory purposes, pension expense based on accrual accounting, according to FASB Accounting Standards Codification Topic 715 or "ASC715." Importantly, the Joint Petition also provides that no party is barred from contesting the Company's pension expense claim and associated ratemaking effects in its next base rate case. This latter term addresses I&E's concerns. Because the Settlement both permits PAWC to adopt the accounting methodology it believes best mitigates expense fluctuations and it preserves interested parties and the Commission's ability to review, and, as appropriate, adjust this expense in a future rate case, it is in the public interest. I&E Statement of Support at 17.
PAWC has agreed to remove from its utility plant in service $12 million that it claimed for Scranton wastewater easements to be acquired. Additionally, PAWC will not record the easements to its utility plant in service until they are acquired and transferred to PAWC, and to the extent that costs to acquire these easements exceeds $12 million, any costs in excess of this amount will not be claimed in future rate filings. From I&E's perspective, this Settlement term was essential to ensure that the public interest is protected. I&E Statement of Support at 18.
The Settlement addresses the concerns that I&E raised because it provides that PAWC will not record easements to its utility plant in service until they are actually acquired. Ratepayers benefit from this term because they will not be subjected to paying for easements that PAWC does not yet possess, which would be an unfair and unreasonable result. I&E Statement of Support at 20.
I&E supports the Joint Settlement because PAWC has agreed that in its next base rate filing, it will make an allocation of costs between water and wastewater operations. This allocation will include, but not be limited to, allocation to the revenue requirement for wastewater operations of costs charged to PAWC from the American Water Works Service Company. As I&E explained in its testimony, failing to appropriately allocate costs is not in the public interest. I&E Statement of Support at 21-22.
I&E points to the three year stay out as a provision that provides stability and certainty to ratepayers who will experience rate continuity for over two years from the date of settlement approval. At the same time, the Company will not be prejudiced, as in the event that it experiences unforeseeable hardship beyond its own control, warranting a rate change, it would be able to seek rate relief. I&E states that the stay out provision of the Settlement is in the public interest. I&E Statement of Support at 22-23.
I&E maintains that no party to the proceeding objected to the Company's calculation
of a consolidated tax adjustment in the amount of $4.4 million. The parties have compromised on the level of revenue requirement, the resolution of the parties' varying positions regarding 66 Pa. C.S. § 1301.1(a) and computation of income tax expense for ratemaking purposes. I&E submits that this resolution is in the public interest because the Company will be provided with an adequate level of operating income to allow it to meet its obligation to provide safe, adequate, and reliable service. At the same time, parties, including I&E, are able to preserve their respective positions regarding Act 40 while also saving ratepayers the costs that they would incur from the litigation of this matter. I&E Statement of Support at 23-24.
I&E supports the Joint Settlement because PAWC has agreed to increase the residential water customer charge discount for low-income customers from 80% to 85%. In addition to this commitment, PAWC has additionally agreed to increase the residential wastewater
low-income discount from 15% to 20% of the wastewater bill. PAWC has also agreed to increase its annual contribution to its hardship fund by $100,000 (from $300,000 to $400,000) for water operations and by $40,000 (from $10,000 to $50,000) for wastewater operations. The expenses that result from this increased funding will not be borne by ratepayers. I&E Statement of Support at 24.
Of great concern to the presiding officers were service issues identified during the course of public input hearings in this case. Clearly, the public advocates agreed. I&E summarizes the resolution of these issues in its Supporting Statement:
A crucial part of this Settlement is that is memorializes PAWC's commitment to
address service issues that came to light during this proceeding, and especially during the course of the nine public input hearings held by the Commission. Specifically, as reflected in Exhibit F to the Joint Petition, the Company either has already addressed or has committed to address service issues in the following service areas: East Stroudsburg/Blue Mountain Lakes, East Stroudsburg/Saw Creek Estates, Yardley/Lower Makefield, East Fallowfield, Wilkes-Barre, Harrisburg/New Cumberland, and Wyomissing. I&E Statement of Support at 25-26.
In I&E's view, Appendix F memorializes PAWC's commitment to address service complaints, and to develop and implement comprehensive action plans to remedy the issues that arise. Because water quality and safety is of paramount importance, I&E opines that PAWC's commitments in this area are in the public interest. I&E Statement in Support at 27-28.
I&E supports PAWC's agreement to provide I&E and other parties with information regarding its unaccounted-for water levels that will allow these parties to ensure that PAWC is taking the appropriate steps to ensure that unaccounted for water is kept to minimal levels. Ratepayers benefit from cost savings when unaccounted for water is limited to the minimal extent possible. Therefore, as this term will allow parties to monitor PAWC's progress in mitigating unaccounted for water and associated costs, it serves the public interest. I&E Statement of Support at 28-29.
I&E supports the concept that PAWC will prepare an agreement between the Company and the City of Scranton and the Borough of Dunmore, which will provide for these parties to have regular periodic meetings to discuss street sweeping schedules, prioritize areas for street sweeping, and memorialize PAWC's responsibility to clean catch basins that are within the combined sewer system formerly owned by the Scranton Sewer Authority. PAWC has also agreed to file the resulting agreement with the Commission for review and approval, as it is required to do under 66 Pa. C.S. § 507. From I&E's perspective, most importantly, PAWC has agreed that it will not recover resulting street sweeping charges from its customers. I&E Statement of Support at 29-30.
After a full analysis of PAWC's base rate filing and extensive settlement negotiations among the parties, I&E fully supports the settled upon revenue allocation and rates
design as set forth in the Joint Petition. I&E believes that the settled upon revenue allocations and rate design are in the public interest as they are consistent with prior Commission decisions, provide stability to PAWC and represent a fair and reasonable rate increase to customers. Residential customer charges contained in the Settlement are close to or below what I&E recommended in testimony; therefore, I&E is satisfied that the agreed upon residential customer charges do not include any unwarranted direct or indirect costs. I&E Statement of Support at 33-35.
Under the terms of the Joint Settlement, PAWC's twelve wastewater rate zones will be reduced to five. I&E supports the mergers of the zones enumerated in the Joint Settlement and avers that they further the policy of single-tariff pricing. I&E Statement of Support at 33.
Combined water and wastewater revenue requirement was an important issue for I&E. Pursuant to the Settlement, a portion of the wastewater revenue requirement totaling $4,700,000 is being allocated to water customers with $2,317,000 of that amount being attributable to a portion of the Scranton wastewater revenue requirement and $2,383,000 is attributable to a portion of the revenue requirement for PAWC's other wastewater operations. I&E maintains that these amounts represent a very substantial decrease from PAWC's as-filed proposal to allocate $13,805,187 of the wastewater revenue requirement to water customers, which was compromised of
$3,429,475 of revenue required for PAWC's wastewater operations, excluding Scranton, and $10,375,712, of revenue requirement from PAWC's Scranton operations. I&E submits that these adjustments achieve a result that is in the public interest because while PAWC has been able to use the cost-spreading mechanism provided by Act 11 to provide some relief to wastewater and Scranton wastewater customers, the resulting costs that PAWC's water customers will subsidize have been substantially mitigated. I&E Statement of Support at 34-35.
2. OCA
The terms and conditions of the Settlement satisfactorily address issues raised in the OCA’s original analysis of the Company’s filing. The OCA submits that this Settlement, taken as a whole, is a reasonable compromise in consideration of likely litigation outcomes before the Commission. While the Settlement does not reach all the recommendations proposed by the OCA, the OCA recognizes that the Settlement is a product of compromise. The Commission encourages settlement, and the balance of compromises struck by the settling parties is critical to achieving settlement. Accordingly, the OCA urges the Commission to consider the Settlement as a whole. OCA Statement in Support at 5.
In sum:
Based on an analysis of the Company’s filing, discovery responses received, and
testimony by all parties, the revenue increase under the Settlement represents a result that would be within the range of likely outcomes in the event of full litigation of this case. The increase is reasonable and yields a result that is in the public interest, particularly when accompanied by other important conditions contained in the Settlement such as the stay-out provision and limitations on the Company’s ability to charge customers with costs related to various acquisitions, including the Scranton acquisition. The increase agreed to in the Settlement
provides adequate funding to allow the Company to maintain safe and adequate service and to make important service quality improvements in targeted areas, as discussed in greater detail below. As such, the OCA submits that the increase agreed to in this Settlement is in the public interest and in the interest of the Company’s ratepayers, and should be approved by the Commission. OCA Statement in Support at 11.
With respect to quality of service issues, many of these were raised at public input hearings. It its Statement in Support, the OCA provides a carefully detailed presentation of specific customer issues and their proposed resolutions. OCA Statement in Support at 15-20.
We agree with the OCA’s conclusion that the terms and conditions of the proposed Settlement, taken as a whole, represent a fair and reasonable resolution of the issues raised in this matter. We agree that the Settlement should be approved by the Commission without modification as being in the public interest. OCA Statement in Support at 24.
3. OSBA
The OSBA has determined that the Joint Petition's combined water and wastewater revenue levels are reasonably close to revenue neutral, on a customer class basis, compared to the Company's original proposals. As such, the OSBA determines that the Joint
Petition produces a reasonable outcome that eliminates the risks of litigation on these issues. Moreover, settlement of the remaining issues in this proceeding avoids the litigation of complex, competing proposals and saves the possibly significant costs of further administrative proceedings. Such costs are borne not only by the parties, but ultimately by the Company's customers as well. Avoiding further litigation of this matter will serve judicial efficiency, and will allow the OSBA to more efficiently employ its resources in other areas. Therefore, the OSBA determines that the settlement is in the best interest of PAWC's Small C&I customers. OSBA Statement in Support at 7.
4. PAWC
PAWC presented a very detailed Statement in Support of adoption of the Joint Settlement. As stated above, PAWC recognizes that the active participation of the public advocates was essential to forming the Joint Settlement.
PAWC contends, in sum, that it presented a compelling case for rate relief, evidenced by, among other factors, the fact that PAWC's base rates have not increased since
January 1, 2014. Since the end of the fully projected future test year in its last base rate case (December 31, 2014) through the end of the FPFTY in this case (December 31, 2018), PAWC will have invested approximately $1.26 billion in new and replacement water and wastewater plant while it has experienced a continuing trend of declining water usage by residential customers of 920 gallons, or 2.14%, per year. PAWC Statement in Support at 3.
While offering detailed comments on the issues, PAWC summarizes why the Joint Settlement is in the public interest:
The revenue requirement provisions provide for Settlement Rates that are within
the "constitutional range of reasonableness" and are consistent with the legal
standards articulated in the Bluefield, Hope and Barasch decisions, as interpreted
and applied by the Pennsylvania Supreme Court in Pennsylvania Gas and Water.
The Settlement Rates reflect a careful balance of the interests of customers with
those of the Company and its investors. As such, the Settlement Rates protect
customers from paying excessive rates while allowing the Company and its
investors a reasonable opportunity to earn a fair return on their investment in
property devoted to public service and to obtain additional capital needed to meet
the Company's service obligations.
The rate structure and rate design provisions of the Settlement resolve a number
of contentious issues in a manner that is acceptable to parties representing the
major customer classes and service classifications. The Joint Petitioners are in
general agreement that the Settlement Rates provide for reasonable progress in
moving all major customer classes closer to their cost of service consistent with
the Commission-approved principle of gradualism.
The Settlement resolves various contested issues, including, in particular, those
pertaining to the Company's provision of wastewater service in the Scranton CSS
in a manner that is fair to the various stakeholders involved and provides a
reasonable resolution.
The Settlement assures that all service-related and billing issues raised by
witnesses at public input hearings and in the direct testimony of OCA witness
Fought will be addressed and resolved by specific, concrete measures set forth in
detail in Appendix F to the Joint Petition.
The Settlement materially enhances the assistance available to low-income water
and wastewater customers of the Company.
In reaching this Settlement, the Joint Petitioners thoroughly considered all issues,
including those raised in the testimony and evidence presented by the parties to
this proceeding and during public input hearings. As a result of that
consideration the Joint Petitioners believe that the Settlement meaningfully
addresses all such issues and, therefore, should be approved without modification.
All of the foregoing benefits are achieved while also conserving the time,
resources and money that would otherwise have to be expended if this case were
to be fully litigated. Customers are direct beneficiaries of these savings.
Supporting Statement of PAWC at 45-47.
There is one formal Complaint in this case filed by a person who is not a PAWC water customer. Mr. Stockton Alloway is a wastewater customer of PAWC, but has a private water well for his domestic water supply. Mr. Alloway filed a Formal Complaint alleging that the fixed rate he is charged for wastewater service provided by the Company is unfair because he is a single individual and his actual water usage is significantly lower than that of an average residential water customer.
The Company, working with the OCA, has agreed to create a limited pilot program to address, and develop information about, the kinds of concerns raised by Mr. Alloway's Formal Complaint. Accordingly, if technically feasible, PAWC will install a meter on Mr. Alloway's well, at the Company's cost, to measure his actual usage and bill Mr. Alloway's wastewater service under its metered wastewater rates in lieu of the fixed rate he is currently charged. The Company will use the metered data to assess how its flat rate wastewater bills compare to usage based bills for similar customers. However, the Company notes that it will need to determine whether the configuration of Mr. Alloway's well and interior piping can accommodate the installation of a meter. PAWC Statement in Support at 37-38.
5. CEO
CEO is a not-for-profit Pennsylvania corporation and an advocate for its
clients - the low-income population of Luzerne County. CEO supports the Joint Petition for Settlement and believes that it is in compliance with the applicable laws and regulations and serves the public interest based upon the following: (1) the Settlement increases funding for the Company's Hardship funds. This increase will help low-income customers deal with the effect of the rate increase resulting from this Settlement; (2) the Company reiterates its intent to continue to use community-based organizations to assist in the implementation of its universal service
programs; and (3) the Company proposed in its initial filing to increase its fixed monthly residential customer charge from $15.00 to $18.50. Such an increase in the fixed charge
would have lessened the motive and ability of the residential class to conserve energy and reduce
their monthly bill. The Settlement lessens such a negative impact in that it provides that the
fixed monthly residential customer charge will set at $16.50. CEO Statement in Support at 1-2.
6. PAWLUG and AK Steel
We note that both PAWLUG and AK Steel filed letters stating that each finds the Joint Settlement to be a reasonable compromise of the issues of all parties in light of the risks and expense of litigation.
c. Disposition
First, we commend the active parties for what we are sure was a challenging task in arriving at a Joint Settlement. While the Statements of Support for the Settlement are summarized above, reading the actual Statements in their entirety reveals to the discerning just how extended and necessarily detailed the negotiations were. It is very clear to us as presiding officers that the Company and the public advocates represented their clients zealously. We are convinced and accept the representation of the active parties that had this matter been litigated, it is very unlikely that a better conclusion could have been reached.
While it is true that it is a challenge assessing whether a “black box settlement” is in the public interest, we make an assumption (or a set of assumptions) that we find are well-stated by I&E:
I&E represents that all issues raised in testimony have been satisfactorily resolved through discovery and discussions with PAWC or are incorporated or considered in the resolution proposed in the Settlement. The very nature of a settlement requires compromise on the part of all parties. This Settlement exemplifies the benefits to be derived from a negotiated approach to resolving what can appear at first blush to be irreconcilable regulatory differences. The Joint Petitioners have carefully discussed and negotiated all issues raised in this proceeding, and specifically those addressed and resolved in this Settlement. Further line-by-line identification of the ultimate resolution of the disputed issues beyond those presented in the Settlement is not necessary as . . . the Settlement maintains the proper balance of the interests of all parties. Supporting Statement of I&E at 36.
Compelling testimony was presented by PAWC’s ratepayers at the public input hearings in this case, and their comments need to be considered. The generally expressed concern was that the rate increase is too high and will not be affordable for those struggling in a
stagnant economy or seniors who rely primarily on Social Security. We understand that any rate increase may be a burden for these ratepayers.
In this case, while the proposed Settlement provides for an increase in annual operating revenues of $61.85 million, or approximately 9.41% increase, in lieu of the $107.9 million, or approximately 16.4%, increase originally requested, an increase of almost 10% coming so soon after the increase in the Company’s 2013 rate case gives us pause. We are, however, reassured by I&E’s representation that the residential customer charges contained in the Settlement are close to or below what I&E recommended in testimony, and that I&E is satisfied that the agreed upon residential customer charges do not include any unwarranted direct or indirect costs. Supporting Statement of I&E at 33.
The “real world” dollar impact of the Joint Settlement is as follows:
The proposed Settlement provides for an increase in annual operating revenues of $61.85 million, or approximately 9.41%, in lieu of the $107.9 million, or approximately 16.4%, increase originally requested. The total Company increase is comprised of an increase in operating revenues from water operations of $56,281,090 and an increase in operating revenues from wastewater operations of $5,568,193.
Under the Settlement Rates, the monthly bill of a typical residential water customer in the Company Rate Zone 1 (in which 99.8% of all water customers are served) will increase from $55.63 to $60.85, or by 9.38%. Under the Settlement Rates, the monthly bill of a typical residential wastewater customer in Rate Zone 1 will increase from $56.96 to $64.93, or by 13.9%.
Under the Settlement Rates, the Rate Zone 1 5/8-inch meter customer charge for the residential customer class will be $16.50 per month in lieu of the $18.50 customer charge proposed by the Company. The same percentage increase as that for 5/8 inch meters will be applied to the customer charges for all other meter sizes and classes of customers in Rate Zone 1, except for the Industrial class. The 5/8-inch customer charge for the Industrial class in Rate Zone 1 under the Settlement Rates will be $24.50, and the same percentage increase will be applied for all other meter sizes.
In sum, we find much in the Joint Settlement that is beneficial, either directly or indirectly, to ratepayers. Specifically, the following agreements among the parties cause the presiding officers to recommend adoption of the Joint Settlement:
- That PAWC will submit a separate revenue requirement study for each combined sewer system and will file a cost of service study that separately identifies all storm water costs for CSS operations. Settlement Paragraph 11.
- That the Company has agreed to provide the Commission’s Bureau of Technical Utility Services (TUS), I&E, OCA and OSBA, updates to PAWC Exhibit No. 3-C, including actual plant additions and retirements by month for the twelve months ending December 31, 2017. Also, PAWC has agreed that on or before April 30, 2019, the Company will update Exhibit No. 3-C for the twelve months ending December 31, 2018. In PAWC’s next base rate proceeding, the Company will prepare and submit a comparison of its actual expenses and rate base additions for the twelve months ended December 31, 2018 to its projections in this case. Settlement Paragraph 14.
- That PAWC will not implement a DSIC during the calendar year ending December 31, 2018. Settlement Paragraph 15.
- That PAWC will remove from utility plant in service $12 million claimed for Scranton wastewater easements to be acquired. Only when the easements are acquired and transferred to the Company will the Company record them to utility plant in service. Any costs incurred to acquire easements associated with assets acquired from the SSA above $12 million will not be claimed in future rate filings. The Company may establish a regulatory asset, for
accounting purposes only, in an amount not to exceed $12 million. The regulatory asset will be reduced by the amount of Scranton wastewater easements recorded to utility plant in service. The Company will not claim any portion of the regulatory asset as an addition to rate base or as an expense for ratemaking purposes. Settlement Paragraph 18.
- That the Company agrees to make an allocation of common costs between water and wastewater operations in its next base rate filing. Settlement Paragraph 20.
- That PAWC will not file for another general rate increase under Section 1308(d) of the Public Utility Code for its existing water operations, wastewater operations
excluding Scranton wastewater or Scranton wastewater operations prior to March 31, 2020. Settlement Paragraph 21.
- That PAWC has agreed to increase the residential water customer charge discount for low-income customers from 80% to 85%. In addition to this commitment, PAWC has additionally agreed to increase the residential wastewater low-income discount from 15% to 20% of the wastewater bill. PAWC has also agreed to increase its annual contribution to its hardship fund by $100,000 (from $300,000 to $400,000) for water operations and by $40,000 (from $10,000 to $50,000) for wastewater operations. The expenses that result from this increased funding will not be borne by ratepayers. Settlement Paragraphs 25-26.
- That the Company’s annual contributions to its hardship grant program for water and wastewater operations will be recorded as a “below the line” expenses and will not be claimed by PAWC for recovery in its rates. Settlement Paragraph 26.
- The Settlement will resolve the parties’ issues concerning the recovery of a portion of wastewater revenue requirement from the customer base of the Company’s water operations. Specifically, under the Settlement Rates only $4.7 million of wastewater revenue requirement – not the amount of $13.8 million PAWC originally proposed – would be allocated to its water operation’s cost of service. This reduction effectively assures that the cost of collecting, treating and disposing of storm water in the former Scranton Sewer Authority’s Combined Sewer System will remain within, and be recovered from wastewater customers within, PAWC’s Scranton and Dunmore wastewater service area.
- That with regard to service-related issues, in response to concerns raised by the OCA in its testimony in this case and by customers at the Public Input Hearings, the Company will take the actions as set forth in Appendix F to the Joint Petition. Settlement Paragraph 27. Having heard or reviewed the specific customer concerns at the public input hearing, including those of several elected representatives, the correctives actions in Appendix F assure us that customer concerns were also heard by PAWC and will be acted on.
- That the Company agrees to invest $2.2 million to construct water main extensions under and pursuant to Rule 27.1(F) of its water tariff, which authorizes main extensions to be installed without customer contributions subject to Commission approval in order to address health and safety concerns. The Company will work with the OCA and other interested parties to identify additional main extensions that satisfy the criteria of Tariff Rule 27.1 (F). Settlement Paragraph 33.
One formal Complaint, Alloway v. Pennsylvania-American Water Company, Docket No. C-2017-2604423, is specifically addressed in the Joint Settlement. Mr. Stockton Alloway is a wastewater customer of PAWC, but has a private water well for his domestic water supply. Mr. Alloway contends that the fixed rate he is charged for wastewater service provided by the Company is unfair because he is a single individual and his actual water usage is significantly lower than that of an average residential water customer. PAWC, working with the OCA, has agreed to create a limited pilot program to address, and develop information about, the kinds of concerns raised by Mr. Alloway's Complaint. If technically feasible, PAWC will install a meter on Mr. Alloway's well, at the Company's cost, to measure his actual usage and bill Mr. Alloway's wastewater service under its metered wastewater rates in lieu of the fixed rate he is
currently charged. The Company will use the metered data to assess how its flat rate wastewater bills compare to usage based bills for similar customers.
After considering the Joint Settlement, including the reduction in the originally proposed rates, the changes in rate design and structure, the many agreements that PAWC has entered into with the public advocates to address specific customer concerns, to increase transparency, and the savings achieved through settlement rather than fully litigating and briefing contested issues, it is our opinion that the Joint Settlement is fair, reasonable, just and in the public interest. Accordingly, we recommend that the Joint Settlement submitted in this proceeding be approved without modification by the Commission.
VI. CONCLUSIONS OF LAW
1. The Commission has jurisdiction over the subject matter and parties to this proceeding. 66 Pa.C.S. §§ 701, 1308(d).
2. Pennsylvania-American Water Company has met its burden of proof to show that the rates, rules and regulations in the settlement are lawful, just and reasonable. 66 Pa.C.S. § 315(a).
3. To determine whether a settlement should be approved, the Commission must decide whether the settlement promotes the public interest. Pa. Pub. Util. Comm’n v. C. S. Water & Sewer Assoc., 74 Pa.PUC 767 (1991); Pa. Pub. Util. Comm’n v. Philadelphia Electric Co., 60 Pa.PUC 1 (1985).
4. The settlement rates, terms and conditions contained in the Joint Petition for Settlement of rate investigation at Docket No. R-2017-2595853 submitted by the Pennsylvania-American Water Company, the Office of Consumer Advocate, the Office of Small Business Advocate, the Bureau of Investigation and Enforcement, the Commission on Economic Opportunity, AK Steel, and Pennsylvania American Water Large Users Group are just, reasonable and in the public interest. Dominion Peoples’ Universal Service and Energy Conservation Plan and Pa. Public Utility Commission v. The Peoples Natural Gas Co., Docket
Nos. M-00051880; R-00051093; R-00051093C0001, Slip Op. at 12 (December 5, 2006); Pa. Public Utility Commission v. C S Water and Sewer Assoc., 74 Pa. PUC 767 (1991).
5. The Commission is required to provide due process to the parties that participated by formal complaint or intervention. When parties are afforded notice and an opportunity to be heard, the Commission requirement to provide due process is satisfied. Schneider v. Pa. Pub. Util. Comm’n, 83 Pa.Cmwlth. 306, 479 A.2d 10 (1984).
VII. ORDER
THEREFORE,
IT IS RECOMMENDED:
1. That the Joint Petition for Settlement of the rates investigation, including all appendices, filed by Pennsylvania American Water Company, the Office of Consumer Advocate, the Office of Small Business Advocate, the Bureau of Investigation and Enforcement the Commission on Economic Opportunity, AK Steel, and Pennsylvania American Water Large Users Group be admitted into the record of the proceeding;
2. That the Joint Petition for Settlement filed by Pennsylvania American Water Company, the Office of Consumer Advocate, the Office of Small Business Advocate, the Bureau of Investigation and Enforcement the Commission on Economic Opportunity, AK Steel, and Pennsylvania American Water Large Users Group be approved and adopted without modification.
3. That Pennsylvania American Water Company shall be permitted to file a tariff supplement incorporating the terms of the settlement and changes to its rates, rules, and regulations as set forth in the Appendices of the Joint Petition for Settlement, to become effective on at least one day’s notice after entry of the Commission’s order approving the settlement for service rendered on and after January 1, 2018, which tariff supplement increases Pennsylvania American Water Company’s rates so as to produce an increase in annual operating revenues of $61.85 million.
4. That the following Complaints are dismissed: Barbara McDade v. PAWC, Docket No. C-2017-2603050; Noel Netel v. PAWC, Docket No. C-2017-2601550; Theresa Sylvester v. PAWC, Docket No. C-2017-2603078; Dolores Landis v. PAWC, Docket No. C-2017- 2603587; John Hooks v. PAWC, Docket No. C-2017-2603669; Casey Hogan v. PAWC, Docket No. C-2017-2604355; Stockton Alloway v. PAWC, Docket No. C-2017-2604423; Fred Wesner v. PAWC, Docket No. C-2017-2604854; Michael Saville v. PAWC, Docket No. C-2017-2604937; Paul Walaski v. PAWC, Docket No. C-2017-2607003; Gail Purdy v. PAWC, Docket No. C-2017-2607376; Ronald Russo v. PAWC, Docket No. C-2017-2607392; Stephen Schwarz v. PAWC, Docket No. C-2017-2607408; Barry Fenicle v. PAWC, Docket No. C-2017-2607439; Margaret O’Leary v. PAWC, Docket No. C-2017-2607455; Dolores Ferraro v. PAWC, Docket No. C-2017-2608009; Hofmann Industries Inc. v. PAWC, Docket No. C-2017-2608461; Nancy Bruce Harris v. PAWC, Docket No. C-2017-2608964; Raymond Saunders v. PAWC, Docket No. C-2017-2609614; Remedios Leynes v. PAWC, Docket No. C-2017-2609712; Alice Piper v. PAWC, Docket No. C-2017-2609820; Alfred Kump v. PAWC, Docket No. C-2017-2609834; Angel Pardellas v. PAWC, Docket No. C-2017-2610358; Philip Codelka v. PAWC, Docket No. C-2017-2610380; Ronald Serafin v. PAWC, Docket No. C-2017-2611289; Linda Waddington-Tully v. PAWC, Docket No. C-2017-2611329; David Dulebohn v. PAWC, Docket No. C-2017-2611485; Shannon Brown v. PAWC, Docket No. C-2017-2611572; Maria Salve v. PAWC, Docket No. C-2017-2611604; Michael Pope v. PAWC, Docket No. C-2017-2611968; James McLaughlin v. PAWC, Docket No. C-2017-2612710; Christopher Visco v. PAWC, Docket No. C-2017-2612728; Gerald and Susan Roe v. PAWC, Docket No. C-2017-2615016; Devin Olsen v. PAWC, Docket No. C-2017-2617879; Homer Cote v. PAWC, Docket No. C-2017-2615256; and Scott Whitcomb v. PAWC, Docket No. C-2017-2626474.
5. That the Complaint of Barry Fenicle v. PAWC, Docket No. C-2017-2607439, is dismissed.
6. That the following formal Complaints are deemed satisfied: Office of Consumer Advocate, Docket No. C-2017-2603058, Office of Small Business Advocate, Docket No. C-2017-2603512.
7. That upon acceptance and approval by the Commission of the tariff supplement filed by Pennsylvania-American Water Company consistent with this Order, this proceeding shall be marked closed.
Date: November 20, 2017 /s/
Dennis J. Buckley
Administrative Law Judge
/s/
Benjamin J. Myers
Administrative Law Judge
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[1] We note that Mr. Alloway’s Complaint is specifically addressed in the Joint Settlement. We also note that Mr. Fenicle testified publicly with respect to his opposition to the rate increase and filed an Objection to the Joint Settlement.
[2] PAWC Exhibit 3-A (Scranton Wastewater Operations), p. 30; PAWC Exhibit 3-A (Scranton Wastewater Operations) Revised, p. 30; PAWC Exhibit No. 12-G, Schedule C.
[3] Joint Application of Pennsylvania-American Water Company and the Sewer Authority of the City of Scranton for Approval of (1) the transfer, by sale, of substantially all of the Sewer Authority of the City of Scranton’s Sewer System and Sewage Treatment Works assets, properties and rights related to its wastewater collection and treatment system to Pennsylvania-American Water Company, and 2) the rights of Pennsylvania-American Water Company to begin to offer or furnish wastewater service to the public in the City of Scranton and the Borough of Dunmore, Lackawanna County, Pennsylvania, Docket No. A-2016-2537209 (Final Order entered Oct. 19, 2016).
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